Introduction to Microeconomics Test 13

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Introduction to Microeconomics Test 13

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Question 1
1 / -0

Directions For Questions

Ram: "Raise in prices of goods have made it difficult to make two ends meet
Shyam: "Yes, the cost of cultivation too has increased very much ".
Raghu: "Government should take steps to curb the price rise and provide relief to common man".
Bhola: "Yes, the government should deal strictly on hoarders and black marketers".

...view full instructions

In the above conversation whose statements show normative side of economics.

A
Shyam

B
Raghu

C
Bhola

D
Both (b) and (c)

Solution

Normative economics deals with what ought to be or how the economic problems should be solved. It discusses what the desirable things are and how they should be realized. Thus it is suggestive in nature as it prescribes solutions to problems.
Thus, we see that the statements given by Raghu and Bhola are both normative statements.
Question 2
1 / -0

A consumer reaches equilibrium at the point where _________.

A
MU = P

B
MU > P

C
MU < P

D
TU = P

Solution

A consumer achieves equilibrium when the marginal utility or additional satisfaction which the consumer is deriving out of the commodity is equal to the price of the commodity after which the additional satisfaction in terms of money is less than the price of the commodity and consumer stops buying the commodity anymore.
Question 3
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It is not uncommon in a socialist economy that ______________.

A
private properly is abolished

B
economic activities are guided by market forces

C
there is absence of state intervention

D
people acquire a motive for earning

Solution

In a socialist economy, both private as well as government organisations utilize resources and distribute them for personal as well as social welfare. Society is given more importance as government handles all central problems of the economy. So usually in socialist economy, private property are abolished for social welfare and to bring in equality in the social and economic status of the people.
Question 4
1 / -0

___________ economics explains cause and effect relationship between economic phenomena.

A
Positive

B
Normative

C
Empirical

D
Applied

Solution

Positive economics: It studies the fact of life i.e it deals with 'things as they are'. It deals with what are the economic problems and how are they solved. It explains the cause and effect relationship and avoids giving suggestions.
Question 5
1 / -0

If an economy is operating at a point inside the production possibilities curve:

A
Its resources are being wasted

B
The curve will begin to shift inward

C
The curve will begin to shift outward

D
This is a trick question because an economy cannot produce at a point inside the curve

Solution

Production possibility curve shows the different combinations of the production of two commodities that can be achieved in an economy given the resources and technology which are to be fully utilized. So if a firm is operating inside the production possibility curve, then it indicates that the firm is not utilizing the supplied resources and technology efficiently.
Question 6
1 / -0

Positive economics is concerned with ________.

A
what should be?

B
what is?

C
both (a) and (b)?

D
what ought to be?

Solution

Positive economics: It studies the fact of life i.e. it deals with 'things as they are'. It deals with what are the economic problems and how are they actually solved. It explains the cause and effect relationship and avoids giving suggestions. It asks the question 'What is'.
Question 7
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Which of the following statements would you consider to be a normative one?

A
Faster economic growth should result if an economy has a higher level of investment.

B
Changing the level of interest rates is a better way of managing the economy than using taxation and government expenditure.

C
Higher levels of unemployment will lead to higher levels of inflation.

D
The average level of growth in the economy was faster in the 1990s than the 1980s.

Solution

A normative statement explains what should be base of the subject according to the belief through valued judgement that describes the fairness of the subject on public policy.
Therefore, 'Changing level of interest rate is a better way of managing the economy' is just a belief that change in interest rate will bring effectiveness in the economy.
Question 8
1 / -0

One country enjoys a comparative advantage over the other in producing oil when _______________.

A
it has more oil than the other country

B
it can produce oil at a lower opportunity cost than the other country

C
it does not need to import oil

D
it wants to export as much oil as possible

Solution

One country enjoys a comparative advantage over the other in producing oil when it can produce oil at a lower opportunity cost than the other country .The country enjoys a greater advantage over other countries if the opportunity cost of producing oil in that country is less than others.
Question 9
1 / -0

Which of the following is positive statement?

A
Wage rate in Satara should be Rs. 500 per day.

B
Wage rate in Satara is Rs. 500 per day.

C
Tax should be reduced.

D
There should be equitable distribution of national income.

Solution

A statement is positive if it is apt with all the facts and is verifiable in the given situation. Therefore, a wage rate which is currently prevailing and can be checked makes it a positive statement.
Question 10
1 / -0

If an economy is operating at a point inside the production possibility curve:

A
Its resources are being wasted.

B
The curve will begin to shift inward.

C
The curve will begin to shift outward.

D
This is trick question because an economy cannot produce at a point inside the curve.

Solution

Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced in an economy with given resources and technology which are to be fully utilized. So any point inside production possibility curve indicates that the resources are not fully utilized and are being wasted.

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Introduction to Microeconomics Test 13

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Introduction to Microeconomics Test 13

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SHARING IS CARING

Question 1

Shyam

Raghu

Bhola

Both (b) and (c)

Solution

Question 2

MU = P

MU > P

MU < P

TU = P

Solution

Question 3

private properly is abolished

economic activities are guided by market forces

there is absence of state intervention

people acquire a motive for earning

Solution

Question 4

Positive

Normative

Empirical

Applied

Solution

Question 5

Its resources are being wasted

The curve will begin to shift inward

The curve will begin to shift outward

This is a trick question because an economy cannot produce at a point inside the curve

Solution

Question 6

what should be?

what is?

both (a) and (b)?

what ought to be?

Solution

Question 7

Faster economic growth should result if an economy has a higher level of investment.

Changing the level of interest rates is a better way of managing the economy than using taxation and government expenditure.

Higher levels of unemployment will lead to higher levels of inflation.

The average level of growth in the economy was faster in the 1990s than the 1980s.

Solution

Question 8

it has more oil than the other country

it can produce oil at a lower opportunity cost than the other country

it does not need to import oil

it wants to export as much oil as possible

Solution

Question 9

Wage rate in Satara should be Rs. 500 per day.

Wage rate in Satara is Rs. 500 per day.

Tax should be reduced.

There should be equitable distribution of national income.

Solution

Question 10

Its resources are being wasted.

The curve will begin to shift inward.

The curve will begin to shift outward.

This is trick question because an economy cannot produce at a point inside the curve.

Solution

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