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Introduction to Microeconomics Test 22

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Introduction to Microeconomics Test 22
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  • Question 1
    1 / -0
    Which of the following is related to the problem 'how to produce'?
    Solution

    The question for "How to produce?" is faced by the economy they should consider both labour intensive techniques as well as capital intensive techniques depending upon the availability of resources in the economy.

  • Question 2
    1 / -0
    In figure, shift of the PPC from $$ab$$ to $$ab_1$$ shows:

    Solution

    Production possibility curve shows all the different attainable combinations of  production of two commodities that can be produced in an economy with the given resources and technology, when they are fully utilized. So, if there is improvement in the technology for a respective commodity, then the production of that commodity rises and PPC shifts on one end.

  • Question 3
    1 / -0
    Normative economics is based on ___________.
    Solution

    The beliefs of individuals expressed in the form of value judgments based on  moral and ethical considerations are termed as normative statements. These statements that describe what ought to be on the basis of ethical considerations are the subject matter of normative economics.

  • Question 4
    1 / -0
    Normative aspects of economics is given by _________.
    Solution

    Alfred Marshall was a British economist who proposed the definition of welfare according to which economics should be a science of creation of welfare for both human as well as society believed that the subject studies the creation of materialistic things in the economy for personal gains which is not good for the welfare of the society. Therefore, he proposed a normative definition on economics. 

  • Question 5
    1 / -0
    The usual shape of PPC is ___________towards the origin.
  • Question 6
    1 / -0
    Misallocation of resources could take place in a free-enterprise economy due to which of the following?
    Solution
    Misallocation of resources could take place in a free-enterprise economy due to which of the following:-a) Incorrect anticipation of demand.
    b) Costs reflecting sacrifice of the producer only.
    c) Needs not being adequately reflected in demand.
    Allocation of resources in the market is often not done properly due to the above-mentioned factors and as a result, it does not lead to the maximization of profits and satisfaction.
    Hence, option D is correcct.
  • Question 7
    1 / -0
    _______________ price mechanism operates in a socialist economy.
    Solution
    In a socialist economy, the price mechanism i.e. price affects the demand and supply of the commodities is directed by a centrally based planning authority that controls the price mechanism to certain limits and regulates it to protect civilians from fraudulent practices.
  • Question 8
    1 / -0
    The planning authority decides 'what to produce' based on which of the following?
    Solution

    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. 

  • Question 9
    1 / -0
    In a socialist economy, the central planning authority takes decisions to solve which of the following problems of the economy?
    Solution

    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?

  • Question 10
    1 / -0
    The planning authority of a socialist economy aims at ___________ distribution of income.
    Solution
    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.
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