Economics GK Quiz-9

Question: The relationship between price of a commodity and the demand for it
(1) is a positive relationship
(2) is an inverse relationship
(3) They are independent of each other
(4) They do not have any relationship
Answer: (2) is an inverse relationship
According to the Law of demand, consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant.



Question: Payment of water charges by the farmers to the government represents
(1) intermediate consumption
(2) final consumption
(3) fixed investment
(4) inventory investment
Answer: (1) intermediate consumption
Intermediate consumption is an accounting concept which measures the value of the goods and services consumed as inputs by a process of production. It excludes fixed assets whose consumption is recorded as consumption of fixed capital. The goods and services may be either transformed or used up by the production process. Intermediate goods or services used in production can be either changed in form (e.g. bulk sugar) or completely used up (e.g. electric power, water, etc).



Question: The problem of Economics arises from
(1) Plenty
(2) Scarcity of goods
(3) More wants and less goods
(4) All of the above
Answer: (3) More wants and less goods
The theory of Economic problem states that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs. The problem then becomes how to determine what is to be produced and how the factors of production (such as capital and labor) are to be allocated. In short, the economic problem is the choice one must make, arising out of limited means and unlimited wants.



Question: Why is rent earned by land even in the long run ?
(1) Land has original and indestructible power
(2) Land is a man made factor
(3) Its supply is inelastic in the short run
(4) Its supply is inelastic in the long run
Answer: (4) Its supply is inelastic in the long run
Rent accrues to land which is fixed in supply even in the longer run. It is permanent. In contrast to it is a quasi rent, introduced by Marshall, which is inelastic in the short run, but elastic in the longer run.



Question: Who is called the Father of Economics?
(1) J.M. Keynes
(2) Malthus
(3) Ricardo
(4) Adam Smith
Answer: (4) Adam Smith
Adam Smith is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics. Smith is cited as the father of modern economics and is still among the most influential thinkers in the field of economics today.



Question: The term “market” in Economics means
(1) A central place
(2) Presence of competition
(3) Place where goods are stored
(4) Shops and super bazars
Answer: (1) A central place
The most important defining characteristic of a market in economics is that it allows buyers and sellers to exchange any type of goods, services and information. According to Walter Christaller’s  ‘CentralPlace Theory,’ a central place is a market center for the exchange of goods and services by people attracted from the surrounding area. The central place is so called because it is centrally located to maximize accessibility from the surrounding region.



Question: Division of labour is limited by
(1) the number of workers
(2) hours of work
(3) extent of the market
(4) working space
Answer: (3) extent of the market
Division of labour is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages. As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market. When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment.



Question: The four factors of production are
(1) land, labour, capital, organisation,
(2) land, electricity, water, labour
(3) labour, capital, land, rainfall,
(4) labour, climate, land, tools,
Answer: (1) land, labour, capital, organisation,
Factors of Production is an economic term to describe the inputs that are used in the production of goods or services in the attempt to make an economic profit. Resources required for generation of goods or services, generally classified into four major groups: (i) Land (including all natural resources), (ii) Labor (including all human resources), (iii) Capital (including all man-made resources), and (iv) Enterprise (which brings all the previous resources together for production).


Question: The term utility means
(1) usefulness of a commodity
(2) the satisfaction which a commodity yields
(3) the service which a commodity is capable of rendering
(4) None of these
Answer: (2) the satisfaction which a commodity yields
In economics, ‘Utility,’ refers to the total satisfaction received from consuming a good or service. It is usually applied by economists in such constructs as the indifference curve, which plots the combination of commodities that an individual or a society would accept to maintain a given level of satisfaction.



Question: The size of the market for a product refers to
(1) the number of people in the given area
(2) the geographical area served by the proudcers
(3) the volume of potential sales of the product
(4) the number of potential buyers of the product
Answer: (4) the number of potential buyers of the product
The size of market for a product refers to number of buyers and sellers in a particular market. This is especially important for companies that wish to launch a new product or service, since small markets are less likely to be able to support a high volume of goods. The market size is defined through the market volume and the market potential (defines the upper limit of the total demand and takes potential clients into consideration).



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