Introduction to Microeconomics Test 18

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Introduction to Microeconomics Test 18

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Question 1
1 / -0

Directions For Questions

Assume that in the given diagram, X and Y axes indicate quantities of Product X and Y respectively.

...view full instructions

Which point on the PPC shows a "productively efficient" level of output.

A
A

B
B

C
C

D
All of the above

Solution

All the points that fall on a production possibility curve shows all different attainable combinations of the production of two commodities that can be produced in an economy with the given resources and technology which are to be fully utilized. Any point beyond and below the curve indicates over-utilization and under-utilization of resources respectively. Therefore, points A, B and C represents productively efficient level of output.
Question 2
1 / -0

Production Possibilities (alternative)
A B C D E F
Hot pockets $$15$$ $$12$$ $$9$$ $$6$$ $$2$$ $$0$$
Eggs $$0$$ $$6$$ $$11$$ $$15$$ $$18$$ $$20$$
According to the production possibilities curve in Table, a combination of $$3$$ Hot Pockets and $$15$$ Eggs:

A
Is attainable and it involves an efficient use of society's resources

B
Is attainable but involves the unemployment or inefficient use of some of society's resources

C
Is not attainable given society's current resources and technology

D
May be produced only if the production possibilities curve shifts inward

Solution

When economy produces 15 eggs, it has the required resources to produce 6 hot pockets. So if it produces less hot pockets with the same production of eggs, the economy has to under utilize the supplied resources.
Question 3
1 / -0

Directions For Questions

Assume that in the given diagram, X and Y axes indicate quantities of Product X and Y respectively.

...view full instructions

Which of the following bundles of goods could not be produced with the resources the economy currently has?

A
A

B
C

C
F

D
E

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. Therefore to achieve point F which is beyond PPC, there is need for increase in the present supply of resources and technology.
Question 4
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Which of the following is likely to cause an inward shift in a country's PPC?

A
Earthquake destroying resources of the country.

B
Scientists discovering new machines.

C
Workers getting jobs in the new metro-project.

D
The country finds new reserves of crude oil.

Solution

When the resources are reduced due to some reason like natural calamity in the economy then the production of commodities also decreases as they use these resources to develop the commodities. Therefore, if the production of the commodities decreases it leads to inward shift in the production possibility curve.
Question 5
1 / -0

If the PPF is linear, i.e., a Straight Line, which of the following is true?

A
As the production of a product increases, the opportunity cost of the product rises.

B
As the production of a product increases, the opportunity cost of that product falls.

C
Opportunity costs are constant.

D
The economy is not at full employment when operating on the PPF

Solution

The slope of production possibility curve represents the marginal opportunity cost, which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. So if PPC is a straight line it indicates constant slope, i.e. constant marginal opportunity cost.
Question 6
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The study of economics in divided into:

A
Deductive and inductive

B
Micro and macro economics

C
Positive and normative

D
An art and science
Solution
Economics is divided into two parts:
Micro economics which deals in the study of individual variables and their relation with each other.
Macro economics that deals in the study of collective or aggregate variables and how they influence the whole economy.
Question 7
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...........indicates the changes in Consumers' purchasing habits, depending on the price variation of a particular product.

A
Total Utility Curve

B
Demand Schedule

C
Production Possibility Curve

D
Purchasing Power Parity
Question 8
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The signs of crisis which created the need for Economic Reforms in 1991 were ________________.

A
Low Forex Reserves

B
Huge National Debt

C
Inflation

D
All of the above

Solution

The signs of crisis which created the need for Economic Reforms in 1991 were:
a) Low Forex Reserves
b) Huge National Debt
c) InflationDuring 1991, Indian Government adopted New Economic Policy which emphasized liberalization, privatization and globalization. During 1991, the economic crisis arose due to many economic problems as the government was facing high fiscal deficit due to rising current account deficit which acted as two spiral rate which lead to heavy inflation in the economy.
Question 9
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Which of the following is normative statement?

A
Planned economics allocate resources via government departments.

B
Most transitional economies have experienced problems of falling output and rising prices over the past decade.

C
There is greater degree of consumer sovereignty in market economies.

D
Reducing inequality should be a major priority for mixed economies.

Solution

Normative statement refers to "what ought to be" or it offers advice. Hence reducing inequality should be a major priority for mixed economies is a normative statement.
Question 10
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__________ economics explains economic phenomena according to their causes and effects.

A
Positive

B
Normative

C
Empirical

D
Applied

Solution

Positive statements refers to those statements that describe matters which have been proven through facts and figures after careful observations and are verifiable. Thus, through these observations the cause and affect relationship can be determined for various economic phenomena and can be generalised.

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	A	B	C	D	E	F
Hot pockets	$$15$$	$$12$$	$$9$$	$$6$$	$$2$$	$$0$$
Eggs	$$0$$	$$6$$	$$11$$	$$15$$	$$18$$	$$20$$

Introduction to Microeconomics Test 18

Result

Introduction to Microeconomics Test 18

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SHARING IS CARING

Question 1

A

B

C

All of the above

Solution

Question 2

Is attainable and it involves an efficient use of society's resources

Is attainable but involves the unemployment or inefficient use of some of society's resources

Is not attainable given society's current resources and technology

May be produced only if the production possibilities curve shifts inward

Solution

Question 3

A

C

F

E

Solution

Question 4

Earthquake destroying resources of the country.

Scientists discovering new machines.

Workers getting jobs in the new metro-project.

The country finds new reserves of crude oil.

Solution

Question 5

As the production of a product increases, the opportunity cost of the product rises.

As the production of a product increases, the opportunity cost of that product falls.

Opportunity costs are constant.

The economy is not at full employment when operating on the PPF

Solution

Question 6

Deductive and inductive

Micro and macro economics

Positive and normative

An art and science

Solution

Question 7

Total Utility Curve

Demand Schedule

Production Possibility Curve

Purchasing Power Parity

Question 8

Low Forex Reserves

Huge National Debt

Inflation

All of the above

Solution

Question 9

Planned economics allocate resources via government departments.

Most transitional economies have experienced problems of falling output and rising prices over the past decade.

There is greater degree of consumer sovereignty in market economies.

Reducing inequality should be a major priority for mixed economies.

Solution

Question 10

Positive

Normative

Empirical

Applied

Solution

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