Tag: income-output determination

Quizzes (4) Questions (97)

Questions Related to income-output determination

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit
A produce strikes his equilibrium when the difference between $TR$ and $TC$ is maximised.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A producer strikes his equilibrium when he produces that amount of output at which the difference between total revenue and total cost is maximum. This is because, $\text{Net profit} = TR - TC$.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit
The producer strikes his equilibrium only when $MP$ is diminishing.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A producer strikes his equilibrium only when $MP$ is diminishing, where the $MC$ is simultaneously rising. The producer stops production when rising $MC$ matches with falling $MR$. Beyond this point, rising $MC$ would exceed $MR$, causing loss of profit.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

In finding equilibrium position of a profit maximising firm, which technique is most convenient ___________.

  1. total revenue and total cost technique

  2. marginal revenue and marginal cost technique

  3. demand and supply technique

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The marginal approach (MR = MC) is considered most convenient because it focuses on the incremental changes in revenue and cost, allowing for precise determination of the optimal output level without needing to calculate total values for every possible quantity.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

A circumstance in which it might pay a monopolist to cut the price of his product is where _________.

  1. MC is falling

  2. MR is greater than MC

  3. his advertising costs are increasing

  4. average costs seem about to fall
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If MR > MC, the firm gains more revenue from selling an additional unit than it costs to produce it. By lowering the price to increase quantity sold, the firm can capture more of this potential profit.

Multiple choice economics income-output determination public debt public debt main feature of tax

Which of the following is not a component of aggregate demand in a two-sector economy?

  1. Net Exports

  2. Government Expenditure

  3. Consumption

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The aggregate demand in two sector economy only includes the expenditure made by the consumer sector and the producer sector. The expenditure by the government sector and net exports are not included in the two sector economy.

Multiple choice economics income-output determination public debt public debt main feature of tax

Which of these is a component of Aggregate demand ______________.

  1. Private consumption expenditure

  2. Investment expenditure

  3. Government expenditure

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The various components of expenditure method are: 

National income by expenditure method = C+I+G+ (X-M) where

C= Private Consumption expenditure by households 

I=  Gross Domestic Investment expenditure

G= Government Final consumption and investment expenditure

(X-M)= Net export ( Export - Import)

Multiple choice economics income-output determination public debt public debt main feature of tax

Aggregate demand can be increased by _______________.

  1. Increasing bank rate

  2. Selling government securities by Reserve Bank of India

  3. Increasing cash reserve ratio

  4. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Aggregate demand refers to the sum total of expenditure that the people plan to incur on the purchase of goods and services produced in an economy corresponding to their different levels of income. It can be increased when the credit creation capacity of the commercial banks gets increased. By increasing bank rate, selling government securities by RBI and increasing cash reserve ratio decrease the aggregate demand in an economy.

Multiple choice economics income-output determination public debt public debt main feature of tax

Demand curve slopes upwards from left to right.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

False. Demand curve slopes downward from left to right because of the law of diminishing marginal utility. According to this law, the utility/satisfaction of the consumer goes on decreasing with every additional consumption of the commodity and hence, the consumer will buy more goods only when the price decreases. Other reasons are income effect, substitution effect, different uses of commodity etc.