Tag: economics

Questions Related to economics

The cost of a commodity should reflect the sacrifice made by the ___________ in terms of resources used in the production process.

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

  1. consumer

  2. individual

  3. producer

  4. society

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Correct Option: D
Explanation:

The cost of a commodity should always be reflected in terms of opportunity cost where the cost of the commodities supplied in the market should be reflected in terms of sacrifice of the resources of the society which are the next best alternative in the production process. 

Misallocation of resources could take place in a free-enterprise economy due to 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. Incorrect anticipation of demand.

  2. Costs reflecting sacrifice of the producer only.

  3. Needs not being adequately reflected in demand.

  4. All of the above

Show answer
Correct Option: D
Explanation:
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 leads to the maximization of profits and satisfaction.

Consumer is regarded as a ____________ in a market 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. slave

  2. sovereign

  3. either A or B

  4. neither A nor B

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Correct Option: B
Explanation:

Consumer is regarded as a sovereign in a market economy since it is believed that the supreme power to control market lies in the hands of the consumers. Consumer is the king pin of the market.In a market economy, prices of the commodities in the market are affected by the forces of demand and supply which depends upon the purchasing power of the consumer that generates open competition in the market. Therefore, consumers are known as sovereign in the market.

___________ are determined in the labour market by the demand for and the supply of labour force.

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

  1. Wages

  2. Rent

  3. Interest

  4. Profit

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Correct Option: A
Explanation:

In a labour market, wages of the labour are decided on the demand and supply of the labour as if the demand of the labour increases their price also increases and vice-versa whereas if supply of the labour increases their price decreases and vice-versa. 

Producers will __________ the available resources when a change in price, and thus, a change in the profit, occurs.

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

  1. reallocate

  2. rearrange

  3. return

  4. arrange

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Correct Option: A
Explanation:

In Price mechanism 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 if there is any changes in the price, the available resource also changes which is reflected inthe profit margin. 

Tastes and preferences of the consumers are reflected through the market in the form of prices they 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. forced to pay

  2. required to pay

  3. willing to pay

  4. either A or C

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Correct Option: C
Explanation:

The consumers demand only those goods from which they are able to derive proper utility against which they pay prices. Therefore, if consumers taste and preference for the commodity is high they will derive more utility out of it and they will pay more price for it. 

Factor income reflects the value of the resources provided by the factor of production.

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:

In price mechanism, factor income directs the flow of factors of production in the market as if the income rises, the supply of the factors increases and if the income decreases, the supply of the factors decreases.

Price mechanism is useful in determining the ___________.

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

  1. social changes

  2. GDP growth rate

  3. techniques of production

  4. both A & C

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Correct Option: C
Explanation:
The central problem of "How to produce?" which is faced by the economy where the economy consider either labour intensive techniques or capital intensive techniques for the production of goods and services in the economy depending upon the available resources in the economy which is easily solved in a price mechanism economy as resources are utilized here depending upon the demand and supply of commodities in the market. 

Factors of production are paid according to their contribution to the output sold.

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:

Factor of production contributes to the production of output and not to the marketing or selling of output. Therefore they are paid according to the number of units of output produced and not according to how many output sold. 

Distribution of total goods and services depends on the distribution 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. goods demanded

  2. income

  3. wealth and savings

  4. money inherited

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Correct Option: B
Explanation:

In a free enterprise economy, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads distribution of goods and services according to the purchasing power of an individual which depends on the distribution of income.