Tag: economics

Quizzes (361) Questions (3598)

Questions Related to economics

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

___________ is determined through price mechanism in the factor market.

  1. Factor interest

  2. Factor income

  3. Factor wealth

  4. Factor investment
Reveal answer Fill a bubble to check yourself
B Correct answer
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. 

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

Factor incomes are used by the factors of production to purchase goods and services, which determines the distribution of the output produced.

  1. True

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

Factor income directs the flow of factors of production in the market but it also contributes to the consumption expenditure or aggregate demand in the economy as if factor income increases the aggregate demand also increases and if factor income decreases the aggregate demand also decreases. 

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

Under price mechanism, resources are directed to the production of luxuries than necessities, since the rich who demand luxury have a higher ability to pay.

  1. True

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

Price mechanism refers to the mechanism where 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. This leads to distribution of goods and services according to the purchasing power of the individuals which brings inequality in the distribution channel. Therefore, only those goods are produced which are in high demand like luxurious goods etc. 

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

The price mechanism has the advantage of preserving the freedom of various economic agents in the economy.

  1. True

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

Price mechanism is also know as free enterprise mechanism as here the flow of goods and services in the market is directed by the supply of the production sector and purchase by the demand sector. Therefore all the economic agents are free here with mutually interdependent relations. 

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

Price mechanism acts as a coordinating and organising force in a free-enterprise economy.

  1. True

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

Price mechanism refers to the mechanism where 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, it coordinates and organize activities in a free enterprise economy. 

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

Producer will adopt capital-intensive technique of production when the price capital is relatively cheaper than the price of labour.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
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. Therefore, a producer will go with the technique which is cheapest among all the techniques of the production. 

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

___________ is a myth since the wants of the consumers are influenced by the producers through advertisement, propaganda and salesmanship.

  1. Production decisions

  2. Consumer sovereignty

  3. Optimum consumption set

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

In price mechanism, the market decides the price of each and every commodity therefore producers become the price taker but they try to influence consumers by the way of advertisement, propaganda and salesmanship so that every consumer in the market become their customer which break the laws of consumer sovereignty in the economy. 

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

According to __________, the invisible hand of price mechanism ensures that while promoting their self-interest, individuals promote social welfare as well.

  1. Alfred Marshall

  2. A.C. Pigou

  3. Adam Smith

  4. J.M. Keynes
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Adam Smith was a Scottish economist who emphasized on price mechanism as a invisible hand that aims at both economical i.e. personal gains as well as social i.e. human gains welfare as it is not influenced by any intervention from any party not involved. 

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

The problem of ___________ is solved under price mechanism by the determination of techniques or methods of production.

  1. what to produce

  2. how to produce

  3. for whom to produce

  4. how much to produce
Reveal answer Fill a bubble to check yourself
B Correct answer
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 is easily solved in a price mechanism economy as resources are utilized here depending upon the demand and supply of commodities in the market. 

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

Absence of perfect competition under price mechanism leads to ____________.

  1. reallocation of resources

  2. misallocation of resources

  3. optimum allocation of resources

  4. no allocation of resources
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector and purchase by the demand sector. Therefore for price mechanism to operate freely, the market should be perfectly competitive because in a perfectly competitive market, the mobility of the factors of production is efficient.