Tag: economics

Questions Related to economics

Reservation price is _________ expected price.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. maximum

  2. ordinary

  3. minimum

  4. higher

Show answer
Correct Option: C
Explanation:

A reservation (or reserve) price is a limit on the price of a good or service. On the demand side, it is the highest price that a buyer is willing to pay. On the supply side, it is the lowest price at which a seller is willing to sell a good or service.

Hence, C is the correct option.

Other factors remaining constant, when price of a commodity rises, there is _____ of supply.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. expansion

  2. contraction

  3. decrease

  4. increase

Show answer
Correct Option: A
Explanation:

According to the law of supply, when the price of a commodity increases, the supply of the commodity increases and when the price of the commodity decreases, the supply of the commodity decreases. We can see that the law of supply has a direct relationship between supply and price. Hence, other factors remaining constant, when price of a commodity rises, there is expansion of supply.

Apple juice and orange juice are substitutes in consumption and apple juice and apple sauce are substitutes in production. If the price of orange juice ________ or the price of apple sauce _____, then the price of apple juice will _______.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Increases; increases; increase

  2. Decreases; decreases; increase

  3. Decreases; increases; decrease

  4. Increases; decreases; increase

Show answer
Correct Option: A
Explanation:

In case of substitutes if the price of one commodity increases the demand for the other good will increase. Because there is an increase in the demand of that other good there will occur a increase in price to bring the market to equilibrium. 

If there is a price ceiling, which of the following is NOT likely to occur?

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Rationing by first-come first-served basis

  2. Black markets

  3. Grey markets

  4. All sellers providing goods for free that were formerly not free

Show answer
Correct Option: D
Explanation:

Price ceiling is the maximum price the seller can charge to the customer. Government imposes price ceiling to protect the consumers. Price ceiling will lead to shortage as demand will exceed supply. This leads to black marketing, rationing by fist come first serve. Price ceiling is giving goods at a price that is fixed by government, the supplier cannot charge beyond that price. Hence, some price is charged even it is minimal but is not free of cost. Hence all the statements except D is incorrect. 

Both households and societies face economic problems because _____________.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. resources are scarce

  2. populations may increase or decrease over time

  3. wages for households and therefore society fluctuate with business cycles

  4. people by nature tend to disagree

Show answer
Correct Option: A
Explanation:

Household sector consumes various resources which are limited in means from the society. Therefore, the problem of these limited resources are faced by the households because their demands are unlimited and by the society as well because the society has to preserve these resources for future needs. 

If resources are abundant, then opportunity costs will be _________.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. infinity

  2. increasing trend

  3. decreasing trend

  4. zero

Show answer
Correct Option: D
Explanation:

If resources are abundant then while producing extra unit of a commodity the producer does not has to shift resources from production of another commodity and there will be no decrease in the production of another commodity. So the opportunity cost will remain the zero in this case. 

Which of the following is correct?

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Normative economics is not concerned with value judgement.

  2. A market is a process that reconciles consumer decision, production decisions and labour decisions.

  3. A mixed economy has a certain level of government intervention in the economy along with private sector ownership of the economy.

  4. Both (B) and (C)

Show answer
Correct Option: D
Explanation:

a) A market is a process that reconciles consumer decision, production decisions and labour decisions.
b) A mixed economy has a certain level of government intervention in the economy along with private sector ownership of the economy.
Both these above statements are correct. 
Market equilibrium is determined by the consumer decision, production decision and labour decisions.
In a mixed economy, decisions are taken by both the private as well as public sectors of economy.

Law of Variable Proportions is applicable to ________.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Medium-run

  2. Short-run

  3. Long-run

  4. All of the above

Show answer
Correct Option: B
Explanation:

Law of Variable Proportions is applicable to - short rum. Law of variable proportion exhibits the relationship between the change of output in respect to the change in only one variable factor, only in short run economy. It involves three phases of production, namely, increasing returns, diminishing returns and negative returns.

What is the full form of DFEC?

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Devaluated Foreign Exchange Control

  2. Direct Foreign Exchange control

  3. Duty Free Export Credit

  4. Direct Free Export Control

Show answer
Correct Option: C
Explanation:

DFEC stands for Duty Free Export Credit which refers to the scheme that allowed credit sales of export goods on which export duty or taxes were subsidies. 

Scheme of Subsidies for setting up industries in backward regions leads to __________________.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Balanced Regional Development

  2. Socially-Beneficial Capital Formation

  3. Both (a) and (b)

  4. Neither (a) nor (b)

Show answer
Correct Option: C
Explanation:
Scheme of Subsidies for setting up industries in backward regions leads to -a) Balanced Regional Development
b) Socially-Beneficial Capital Formation
Subsidies will help to uplift the standard of living of the people living in backward regions which will generate greater per capita income,, which in turn will promote economic development.