Tag: economics

Questions Related to economics

Price mechanism is the instrument for determining the level of _________.

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

  1. production and consumption

  2. savings and investment

  3. technological development

  4. all of the above

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Correct Option: D
Explanation:

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. Therefore, it determines the overall production in the economy that also signifies technological development and investment done. Moreover, it determines the consumption expenditure in the economy through aggregate demand which also signifies the overall savings in the economy. 

The imposition of ceiling on a monopoly's price will affect his ____________.

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

  1. profits only

  2. average revenue in the short-run only

  3. equilibrium output only

  4. equilibrium output and profits

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Correct Option: D
Explanation:

The imposition of price ceiling on monopoly's price will affect his equilibrium output and price. A monopoly is a price maker and influences the market as there are no close substitutes or competitors of the monopolist. By imposing a price restriction the government is restricting the price and there by converting the monopoly market like a competitive one. Hence, the equilibrium output and price will change because of the price ceiling. 

In a socialist economy, it is the responsibility of the ___________ to ensure that adequate amount of goods are made available to the people.

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

  1. central bank

  2. planning authority

  3. NGOs

  4. business firms

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Correct Option: B
Explanation:

The central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided by allocating resources for the production keeping in mind the needs of the people i.e. consumer goods and to satisfy their wants.

The planning authority decides 'what to produce' based on which of the following?

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

  1. Needs of the people

  2. National priorities

  3. Both A & B

  4. Neither A nor B

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Correct Option: C
Explanation:

In a socialist economy, the central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided keeping in mind the needs of the people i.e. consumer goods and national priorities i.e. capital goods. 

The planning authority allocates resources to the production of those commodities which people want.

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

  1. True

  2. False

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Correct Option: A
Explanation:

The central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided by allocating resources for the production keeping in mind the needs of the people i.e. consumer goods and to satisfy their wants. 

In a socialist economy, the central planning authority takes decisions to solve which of the following problems of the economy?

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

  1. What to produce

  2. How to produce

  3. For whom to produce

  4. All of the above

Show answer
Correct Option: D
Explanation:

In a socialist economy, the central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the following

  • What to produce? Consumer goods or capital goods?
  • How to produce? Using labour or capital?
  • For whom to produce? Rich people or poor people?

Under a socialist economy framework, it is the responsibility of the central bank of the country to ensure that adequate amount of goods are made available to the people.

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

  1. True

  2. False

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Correct Option: B
Explanation:

In a socialist economy, the central problems of the economy is solved by a centrally based planning authority which is the government that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided by allocating resources for the production keeping in mind the needs of the people i.e. consumer goods and to satisfy their wants.

The planning authority of a socialist economy aims at ___________ distribution of income.

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

  1. inequitable

  2. equitable

  3. random

  4. scattered

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Correct Option: B
Explanation:
In socialist economy, the centrally based planning authority can plans the future government expenditure on various factors of the economy like infrastructure, health, education etc in such a way that it provides adequate employment to all the people unemployed which brings stability in the distribution of income in the economy.

The planning authority is expected to choose a production technique that ensures that the available resources are _____________.

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

  1. fully utilised

  2. under utilised

  3. over utilised

  4. either B or C

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Correct Option: A
Explanation:

The central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'How to produce? Using labour or capital intensive techniques?' which is decided by allocating resources for the production keeping in mind the most efficient technique that will maximize the output of the economy. 

The economic problems in a mixed economy are solved with the use of ____________.

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

  1. price mechanims

  2. economic planning

  3. both A & B

  4. neither A nor B

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Correct Option: C
Explanation:
In a mixed economy both private as well as public enterprises utilize the resources for the production of goods and services in  the economy for personal as well as social gains. Therefore, the private sector generates price mechanism in the economy to solve to the centrally based economic problems whereas the public sector depends upon an efficient economic plan to be executed to eradicate these problems.