Question 1

The shape of average cost curve is ______________

Accepted Answer

The average cost curve is typically U-shaped due to economies and diseconomies of scale. Initially, average costs decrease as output increases due to spreading fixed costs over more units (economies of scale). Eventually, average costs increase with further increases in output due to inefficiencies (diseconomies of scale).

Question 2

In the long - run there is no _______________ cost

Accepted Answer

In the long run, all costs are variable, and there are no fixed costs because firms can adjust all inputs and factors of production.

Question 3

Which is the first derivative of the TC function.

Accepted Answer

The first derivative of the Total Cost (TC) function is the Marginal Cost (MC), which represents the change in total cost that arises when the quantity produced changes by one unit.

Question 4

TC=a+bQ is a ________________ Cost function

Accepted Answer

The given cost function TC = a + bQ is a linear function because it graphs as a straight line, where 'a' is the fixed cost and 'bQ' represents the variable cost that changes linearly with the quantity 'Q'.

Question 5

When AC increases MC will___________________

Accepted Answer

When Average Cost (AC) increases, it implies that the cost of producing each additional unit is increasing, which directly impacts the Marginal Cost (MC), causing it to increase as well. MC is the cost of producing one more unit of a good, and if the overall average cost is rising, the cost of additional units is also likely to rise.

Question 6

Which of the following is not an example for durable goods

Accepted Answer

Durable goods are items that don't wear out quickly and provide utility over time, unlike non-durable goods which are consumed or have a short life span. Food is a non-durable good because it is consumed quickly and needs to be replaced frequently.

Question 7

Autonomans demand is also known as __________________ demand

Accepted Answer

Autonomous demand is also known as direct demand because it refers to the demand for goods and services that are directly consumed by the end user.

Question 8

When tax rate increase the supply of products _______________

Accepted Answer

When tax rates increase, the cost of production for suppliers often increases as well. This can lead to a decrease in supply because it becomes more expensive for companies to produce and sell their products at the same price.

Question 9

The shape of a demand curve is _________________

Accepted Answer

The shape of a demand curve is typically downward sloping, reflecting the inverse relationship between price and quantity demanded. As the price of a good or service increases, the quantity demanded usually decreases, and vice versa.

Question 10

The demand curve for inferior good is ____________________

Accepted Answer

The demand curve for an inferior good is negatively sloped, indicating that as income decreases, the demand for the inferior good increases, and as income increases, the demand for the inferior good decreases. This is consistent with the general law of demand, which states that there is an inverse relationship between the price of a good and the quantity demanded, but in the case of inferior goods, the income effect also plays a significant role.

Question 11

Unitary elasticity of demand is

Accepted Answer

Unitary elasticity of demand occurs when the percentage change in quantity demanded is equal to the percentage change in price, resulting in an elasticity coefficient of exactly one.

Question 12

Which one is not an exception to the Law of Demand

Accepted Answer

The Law of Demand states that, ceteris paribus, as the price of a good increases, the quantity demanded decreases, and vice versa. Normal goods follow this law, meaning as income increases, demand for these goods increases, adhering to the Law of Demand. Exceptions to the Law of Demand include Giffen goods, Veblen goods (articles of distinction), and situations involving ignorance or speculation, where the usual relationship between price and demand might not hold.

Question 13

When the demand curve is a rectangular hyperbola, it represents

Accepted Answer

A rectangular hyperbola demand curve represents unitary elasticity, meaning the percentage change in quantity demanded is equal to the percentage change in price, thus the total revenue remains constant.

Question 14

The horizontal demand curve represents

Accepted Answer

A horizontal demand curve represents perfectly elastic demand, meaning that consumers are willing to purchase any quantity of the good at a specific price, but no quantity at a price higher than that.

Question 15

Who is the present governor of RBI?

Accepted Answer

Raghu Ram Rajan is not the current governor of RBI as of my last update. The correct answer should reflect the current governor as of the latest information available to me, which might not include the most recent appointment.

Question 16

What do you call the cost incurred in past?

Accepted Answer

Historical cost refers to the original monetary value of an economic item. It's the cost incurred in the past for acquiring an asset or a service, recorded in the financial statements at the time of purchase or acquisition.

Question 17

Who is the lender of the last resort?

Accepted Answer

The Reserve Bank (of India, in this context) acts as the lender of the last resort, meaning it provides funds to financial institutions when they have nowhere else to turn, ensuring liquidity and stability in the financial system.

Question 18

Which bank is called Banker's Bank?

Accepted Answer

The Reserve Bank of India (RBI) is called the Banker's Bank because it acts as a banker to the government and to the other banks in the country, providing essential banking services such as holding deposits, issuing currency, and managing the country's monetary policy.

Question 19

Which is the system followed by RBI with regard to note issue?

Accepted Answer

The Reserve Bank of India follows the Fixed Minimum Reserve System for the issue of notes. Under this system, the RBI is required to keep a minimum reserve of gold and foreign currencies, beyond which it can issue currency.

Question 20

Which bank introduced credit card for the first time in India

Accepted Answer

Central Bank of India was the first bank to introduce credit cards in India in 1980.

Quiz 2: Economics and Banking