Tag: economics

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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

Which of the following is a reason for the negative slope of the PPF?

  1. Inverse relationship between the use of technology and the use of natural resources.

  2. Scarcity, i.e., at any point in time we have limited amount of productive resources.

  3. Resource specialisation.

  4. Increasing opportunity costs.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The slope of production possibility curve represents the marginal opportunity cost, which refers to the additional sacrifice that would have to be made when resources and technology are shifted from production of one commodity to the other owing to limited resources. This opportunity cost between two goods is increasing which is denoted through the negative slope of PPC.

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 the main organisation for implementing Multilateral trade agreements.

  1. IMF

  2. WTO

  3. World Bank

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

World Trade Organisation is an apex organisation that regulates trade between all the countries under some rules and regulations set up by the organisation with negotiation with all the countries under trade. They facilitates smooth flow of goods and services between various countries which are in trade agreement. 

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

Discovery of new technical knowledge and improvements in technology leads to _____________________.

  1. Internal Economies of Scale

  2. Internal Diseconomies of Scale

  3. External Economies of Scale

  4. External Diseconomies of Scale
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

External economies of scale take place when an entire business grows larger and firms benefit from subordinate long-run average costs. External economies of scale can also be referred to as positive external benefits of industrial development.

External economies of scale describe comparable conditions, only for complete manufacturing instead of a company. For example, if the city creates an enhanced transportation network to service a particular industry, then all companies in that industry will benefit from the new transport network, and experience decrease production costs.

The correct option is C.

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

Inflation means:

  1. High prices

  2. Prices must be continuously rising

  3. Both (A) and (B)

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

Inflation which is often expressed in percentage is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time continuously which indicates a decrease in the purchasing power of a nation's currency.

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

Multiple choice question:

Principal characteristic of resources are:

  1. they are scarce in relation to our needs

  2. they have alternative uses

  3. both (a) and (b)

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Resources refers to the resources which are limited in quantity and have alternative uses in production of various commodities. So the problem of these scarce resources is reflected in the aggregate supply of the economy which is also limited owing to limited source of inputs. 

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
When some resources are shifted from Use-$1$ to Use-$2$ (given technology and resources), the marginal rate of transformation _____________, as per the concept of PPC.

  1. increases

  2. decreases

  3. remains constant

  4. is zero
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When some resources are shifted from Use-1 to Use-2( given technology and resources) the marginal rate of transformation increases, as per the concept of Production possibility curve.Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost or marginal rate of transformation.  

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
Opportunity cost is an avoidable cost.

  1. True

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

Opportunity cost is an avoidable cost- this is a false statement, since opportunity cost cannot be avoided.In an economy, every goods and services has an alternative available. Opportunity cost of production of a commodity refers to the cost which the producer has to sacrifice in terms of the next best alternative which could be produced out of that cost in order to produce every unit of the given commodity. Therefore, to produce every commodity producer has to sacrifice some units of the other commodity. 

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

In a market economy the consumers enjoy the freedom of choice between ____________.

  1. consumption and savings

  2. consumption and investment

  3. savings and investment

  4. all of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In a market 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 where the consumers have freedom of choice between how much they will spend and how much they will save. 

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

Which of the following non-economic conditions serve as a pre-requisite for the operating of price mechanism in an economy?

  1. Developed legal system

  2. Social chaos

  3. Government intervention

  4. None of the above
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. Since price mechanism operates without government intervention, there is need for developed legal system in the economy so that there are less chances of fraudulent practices in the market.