Question 1

The firm is in equilibrium in the factor market when it employs units of labour upto the point where&#10;A)The marginal revenue product of labour is equal to its marginal cost&#10;B)The marginal revenue product of labour is more than its marginal cost&#10;C)The marginal revenue product of labour is less than its marginal cost&#10;D)none

Accepted Answer

A firm is in equilibrium in the factor market when the marginal revenue product (MRP) of labor is equal to its marginal cost (MC). This condition ensures that the firm is maximizing its profits by employing the optimal number of labor units.

Question 2

Equilibrium in the factor market achieved at the factor price and factor quantity is given by&#10;A)The intersection of the factor demand curve and the factor supply curve&#10;B)The sum total of the elasticities of demand and supply&#10;C)The product of the elasticities of demand and supply&#10;D)none

Accepted Answer

Equilibrium in the factor market, like any other market, is achieved at the point where the factor demand curve intersects the factor supply curve. This intersection determines the equilibrium factor price and quantity.

Question 3

Monopsony means&#10;A)A single seller&#10;B)A single buyer&#10;C)Large number of buyers&#10;D)None of the above

Accepted Answer

Monopsony refers to a market condition where there is only one buyer for a particular product or service, giving that buyer significant power over prices and terms.

Question 4

Monopoly means&#10;A)A single seller&#10;B)A single buyer&#10;C)Large number of buyers&#10;D)None of the above

Accepted Answer

Monopoly refers to a market structure characterized by a single seller who has exclusive control over a particular good or service, making it the only provider in the market.

Question 5

Factor prices are determined in the factor market under the forces of&#10;A)Marginal productivity&#10;B)Elasticity of demand&#10;C)Elasticity of supply&#10;D)Demand and supply

Accepted Answer

Factor prices, such as wages for labor or rents for land, are determined by the interaction of demand and supply in the factor market, similar to how prices are determined in goods markets. Demand for a factor is influenced by its marginal productivity, while supply may be influenced by factors such as the elasticity of supply, but the actual price is ultimately set through the equilibrium between demand and supply forces.

Question 6

The labour market equilibrium determines the wage rate and&#10;A)Investment&#10;B)Employment&#10;C)Savings&#10;D)Profits

Accepted Answer

The labour market equilibrium determines the wage rate and employment level. This is because the equilibrium is reached at the point where the supply of labor (from workers) meets the demand for labor (from employers), setting the wage rate and the quantity of labor employed.

Question 7

Equilibrium conditions for factor market is&#10;A)Demand for factors is equal to supply of factors&#10;B)Demand for factors is less than supply of factors&#10;C)Demand for factors is more than supply of factors&#10;D)None of the above

Accepted Answer

Equilibrium in the factor market occurs when the demand for factors of production (such as labor, land, and capital) is equal to the supply of those factors. This balance ensures that the market is cleared, and there are no excesses in supply or demand.

Question 8

Demand for factor of production is&#10;A)Supplementary demand&#10;B)Intermediate goods&#10;C)Derived demand&#10;D)Complementary demand

Accepted Answer

Demand for a factor of production is considered a derived demand because it is dependent on the demand for the goods and services that the factor produces. Factors of production such as labor, land, and capital are not demanded for their own sake but because they contribute to the production of goods and services that are in demand.

Question 9

Factor market will be in equilibrium when&#10;A)Demand for factors is less than its supply&#10;B)Demand for factors is equal to supply of factors&#10;C)Supply of factors is less than for it&#10;D)All of the above

Accepted Answer

The factor market reaches equilibrium when the demand for factors of production (such as labor, land, and capital) is equal to the supply of those factors. This balance ensures that resources are allocated efficiently in the economy.

Question 10

Which of the following is not a factor of production?&#10;A)Land&#10;B)Labour&#10;C)Money&#10;D)Capital

Accepted Answer

Money is not considered a factor of production because it is not directly involved in the production process. Factors of production include land, labor, and capital, which are used to create goods and services. Money, on the other hand, is a medium of exchange and a measure of value.

Question 11

The supply of a good refers to:&#10;A)Stock available for sale&#10;B)Total stock in the warehouse&#10;C)Actual Production of the good&#10;D)Quantity of the good offered for sale at a particular price per unit of time

Accepted Answer

The answer of The supply of a good refers to:&#10;A)Stock...

Question 12

The cost of one thing in terms of the alternative given up is called:&#10;A)Real cost&#10;B)Opportunity cost&#10;C)Production cost&#10;D)Physical cost

Accepted Answer

The answer of The cost of one thing in terms...

Question 13

The producer's demand for a factor of production is governed by the ___ of that factor.&#10;A)Price&#10;B)Marginal Productivity&#10;C)Availability&#10;D)Profitability

Accepted Answer

The answer of The producer's demand for a factor of...

Question 14

Under conditions of perfect competition in the product market:&#10;A)MRP = VMP&#10;B)MRP > VMP&#10;C)VMP > MRP&#10;D)None of the above

Accepted Answer

The answer of Under conditions of perfect competition in the...

Question 15

In a perfectly competitive market a firm in the long run will be in equilibrium when:&#10;A)AC = MC&#10;B)AR = MR&#10;C)MR = MC&#10;D)Price = AR = MR= AC= MC

Accepted Answer

The answer of In a perfectly competitive market a firm...

Question 16

Which of the following is a characteristic of capital as a factor of production?&#10;A)It is fixed in supply&#10;B)It never depreciates&#10;C)It is a passive factor of production&#10;D)It is an active factor of production

Accepted Answer

The answer of Which of the following is a characteristic...

Question 17

On which law of consumption the concept of consumer's surplus is based?&#10;A)Engel's law&#10;B)Law of demand&#10;C)First law of Gossen&#10;D)Second law of Gossen

Accepted Answer

The answer of On which law of consumption the concept...

Question 18

The relation that the law of demand for factor defines is.&#10;A)Income and quantity demanded of a factor&#10;B)Price and quantity of a factor&#10;C)Income and price of a factor&#10;D)Quantity demanded and quantity supplied of a factor

Accepted Answer

The answer of The relation that the law of demand...

Question 19

Union leaders are in a better position to bargain for higher wages if demand for labour is&#10;A)Elastic&#10;B)Inelastic&#10;C)Very large&#10;D)Permanent

Accepted Answer

The answer of Union leaders are in a better position...

Question 20

Sometimes the supply curve of labour ends:&#10;A)Downward&#10;B)Upward&#10;C)Backward&#10;D)Firstly upward and then downward

Accepted Answer

The answer of Sometimes the supply curve of labour ends:&#10;A)Downward&#10;B)Upward&#10;C)Backward&#10;D)Firstly...

Question 21

A firm maximizes profit if:&#10;A)MRP = Wage rate&#10;B)MRP is rising&#10;C)MRP = ARP&#10;D)None of these

Accepted Answer

The answer of A firm maximizes profit if:&#10;A)MRP = Wage...

Question 22

The opportunity cost of a machine which can produce only one product is:&#10;A)Low&#10;B)Infinite&#10;C)High&#10;D)Medium

Accepted Answer

The answer of The opportunity cost of a machine which...

Question 23

When price is below equilibrium level, there will be:&#10;A)Surplus commodity in the market&#10;B)Supply curve will shift&#10;C)Demand curve will shift&#10;D)Shortage of commodity in the market

Accepted Answer

The answer of When price is below equilibrium level, there...

Deck 3: Factor and Product Markets, Equilibrium, and Production Factors