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All questions of Microeconomics for BPSC (Bihar) Exam

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What is the other name for opportunity cost in economics
  • a)
    Total Cost
  • b)
    Marginal cost
  • c)
    Economic cost
  • d)
    Economic problem
Correct answer is option 'C'. Can you explain this answer?

Aryan Khanna answered
Economic cost is the combination of losses of any goods that have a value attached to them by any one individual. Economic cost is used mainly by economists as means to compare the prudence of one course of action with that of another.

A budget constraint line is a result of?
  • a)
    Market price of commodity X
  • b)
    Market price of commodity Y
  • c)
    Income of the consumer
  • d)
    All of above
Correct answer is option 'A'. Can you explain this answer?

Poonam Reddy answered
A budget constraint represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income. Consumer theory uses the concepts of a budget constraint and a preference map to analyze consumer choices.

An economy always produces on, but not inside a PPC.
  • a)
    True
  • b)
    False
  • c)
    Occasionally
  • d)
    Can’t say
Correct answer is option 'B'. Can you explain this answer?

Alok Mehta answered
An economy does not always on a ppc . when an economy produces on ppc it mean there is no unemployment and all the resources are fully and being used efficiently but practically these 2 conditions may not apply . if there is unemployment or inefficent use of resources an ecnmy will opreate inside the ppc therefor the above given statement is refuted .

A resource is a
  • a)
    Service only
  • b)
    Good only
  • c)
    Good or a service
  • d)
    Not a good or a service
Correct answer is 'C'. Can you explain this answer?

Ruchi Basak answered
A resource is good or a service because we can extract the resources from nature which can be used as a good . example : cotton is obtained from nature which we wear as a cloth so it is a good.

The basic factors of production are land, labour, capital and______
  • a)
    Investment
  • b)
    Entrepreneurship
  • c)
    Resources
  • d)
    Machinery
Correct answer is option 'B'. Can you explain this answer?

Alok Mehta answered
The four factors of production are land, labor, capital goods, and entrepreneurship. They are the inputs needed for supply. They produce all the goods and services in an economy. That's measured by gross domestic product. 

Q  In Economics, a good is something which
a)Satisfies wants and needs
b)Is a service
c)Appears appealing
d)Can be a service
Correct answer is 'A'. Can you explain this answer?

Arnav Chawla answered
In economics, goods are materials that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product.

The want satisfying power of a commodity is known as:
  • a)
    Utility
  • b)
    Consumption
  • c)
    Supply
  • d)
    Demand
Correct answer is option 'A'. Can you explain this answer?

Aryan Khanna answered
The want satisfying power of a commodity is called utility. It is a quality possessed by a commodity or service to satisfy human wants. Utility can also be defined as value-in-use of a commodity because the satisfaction which we get from the consumption of a commodity is its value-in-use.

The central problems of an economy are due to
  • a)
    Limited choice
  • b)
    Unlimited choice
  • c)
    Unlimited resources
  • d)
    Scarce resources
Correct answer is option 'D'. Can you explain this answer?

Arun Sharma answered
Central problems arise in an economy due to scarcity of resources having alternative uses in relation to unlimited wants.
The Central Problem of all economies is scarcity.
Limited Resources + Unlimited Wants = Scarcity
Scarcity forces individuals, firms governments and societies to make choices.

A firm can sell as much as it wants at the market price. The situation is related to?
  • a)
    Monopoly
  • b)
    Monopolistic competition
  • c)
    Perfect competition
  • d)
    Oligopoly
Correct answer is option 'C'. Can you explain this answer?

Vikas Kapoor answered
Pure or perfect competition is a theoretical market structure in which the following criteria are met: All firms sell an identical product (the product is a "commodity" or "homogeneous"). All firms are price takers (they cannot influence the market price of their product). Market share has no influence on prices.

According to the law of diminishing marginal utility, _________?
  • a)
    Additional consumption always yields extra utility
  • b)
    Additional consumption leads to lower average total utility
  • c)
    Additional consumption always yields negative utility
  • d)
    After a point any addition in the consumption causes a reduction in total utility.
Correct answer is option 'D'. Can you explain this answer?

Priya Patel answered
According to the Law of Diminishing Marginal Utility, marginal utility of a good diminishes as an individual consumes more units of a good. In other words, as a consumer takes more units of a good, the extra utility or satisfaction that he derives from an extra unit of the good goes on falling.
It should be carefully noted that is the marginal utility and not the total utility than declines with the increase in the consumption of a good. The law of diminishing marginal utility means that the total utility increases but at a decreasing rate.

In the long run TPP changes with the change in which of the following factors
  • a)
    Fixed factors
  • b)
    Variable factors
  • c)
    Economic cost
  • d)
    All the factors
Correct answer is option 'D'. Can you explain this answer?

Ishan Choudhury answered
In the long run TPP changes with the change in all the factors  is the right option because total product can be change in long run production function. After change every situation because in long run production more time should be taken by performer.

Which of the following curve has a negative slope and cannot interest each other?
  • a)
    Isoquants
  • b)
    Demand and supply curves
  • c)
    Indifference curves
  • d)
    None of above
Correct answer is option 'C'. Can you explain this answer?

Vikas Kapoor answered
An indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. Along the curve, the consumer has no preference for either combination of goods because both goods provide the same level of utility.
Each indifference curve is convex to the origin, and no two indifference curves ever intersect.

____________ is an ideal market?
  • a)
    Monopolistic competition
  • b)
    Oligopoly
  • c)
    Perfect competition
  • d)
    Monopoly
Correct answer is option 'C'. Can you explain this answer?

Vikas Kapoor answered
Pure or perfect competition is a theoretical market structure in which the following criteria are met: All firms sell an identical product (the product is a "commodity" or "homogeneous"). All firms are price takers (they cannot influence the market price of their product). Market share has no influence on prices.

When AR=Rs. 10 and AC=Rs. 8, the firm makes?
  • a)
    Gross profit
  • b)
    Supernormal profit
  • c)
    Normal profit
  • d)
    Net profit
Correct answer is option 'B'. Can you explain this answer?

Ishan Choudhury answered
Supernormal profit is defined as extra profit above that level of normal profit.
Here the firm earns profit of Rs. 2 over the cost occurred.

Cartels exist in
a) Monopoly
b) Duopoly
c) Oligopoly
d) Perfect Competition
Correct answer is option 'C'. Can you explain this answer?

Kavita Joshi answered
A cartel is a grouping of producers that work together to protect their interests. Cartels are created when a few large producers decide to co-operate with respect to aspects of their market. Once 

In short run TPP changes with the change in
  • a)
    Marginal Product
  • b)
    Average product
  • c)
    Total Product
  • d)
    Average cost
Correct answer is option 'A'. Can you explain this answer?

Vikas Kapoor answered
Total production product changes with the marginal utility of the product because TP increases at diminishing rate of MP and TP is maximum when MP=0

Can you explain the answer of this question below:

Indifference curve represents?

  • A:

    Four commodities

  • B:

    Less than two commodities

  • C:

    Only two commodities

  • D:

    More than two commodities

The answer is C.

Alok Mehta answered
An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.

The coefficient of price elasticity of demand is always
  • a)
    Zero
  • b)
    Undefined
  • c)
    Positive
  • d)
    Negative
Correct answer is option 'D'. Can you explain this answer?

Devansh Goyal answered
Explanation:

The coefficient of price elasticity of demand is a measure of the responsiveness of the quantity demanded of a good or service to changes in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.

The coefficient of price elasticity of demand can take on different values depending on the degree of responsiveness of quantity demanded to price changes. However, it is always negative because of the inverse relationship between price and quantity demanded.

Here are some possible values of the coefficient of price elasticity of demand and what they indicate:

- Elastic demand (|PED| > 1): A small percentage change in price leads to a relatively larger percentage change in quantity demanded. Consumers are very responsive to price changes, and the total revenue of the seller decreases when the price is increased.
- Inelastic demand (|PED| < 1):="" a="" large="" percentage="" change="" in="" price="" leads="" to="" a="" relatively="" small="" percentage="" change="" in="" quantity="" demanded.="" consumers="" are="" not="" very="" responsive="" to="" price="" changes,="" and="" the="" total="" revenue="" of="" the="" seller="" increases="" when="" the="" price="" is="" />
- Unit elastic demand (|PED| = 1): A percentage change in price leads to an equal percentage change in quantity demanded. The total revenue of the seller remains constant when the price is changed.

Conclusion:

In conclusion, the coefficient of price elasticity of demand is always negative because of the inverse relationship between price and quantity demanded. The value of this coefficient can vary depending on the degree of responsiveness of quantity demanded to price changes.

Marginal Revenue is
  • a)
    Same as total revenue
  • b)
    Addition to the total revenue on the production of an additional unit of Output
  • c)
    Addition to the total revenue on the sale of an additional unit of Output
  • d)
    Additional cost involved in production
Correct answer is option 'C'. Can you explain this answer?

Simran Mishra answered
**Marginal Revenue: Addition to the total revenue on the sale of an additional unit of Output**

Marginal revenue is a concept used in economics to describe the additional revenue generated from the sale of one additional unit of output or product. It is the change in total revenue that occurs as a result of producing and selling one more unit of a product.

**Explanation:**

Marginal revenue is calculated by dividing the change in total revenue by the change in the quantity of output sold. It represents the increase in revenue that a firm earns when it sells one more unit of output.

To understand this concept, let's consider an example of a company that sells smartphones. Suppose the company sells its smartphones for $500 each, and it sells 1000 units in a month, resulting in a total revenue of $500,000. Now, if the company decides to produce and sell one more smartphone, it would have to adjust its price to attract buyers. Let's assume the company reduces the price to $400 for the additional unit.

In this case, the marginal revenue for the additional unit would be $400 because that is the amount of revenue generated from the sale of that unit. The total revenue after selling 1001 units would be $500,000 + $400 = $500,400. Therefore, the marginal revenue for the additional unit is $400.

It is important to note that marginal revenue can vary depending on the market conditions, demand for the product, and the pricing strategies employed by the firm. In some cases, marginal revenue may be positive, indicating an increase in revenue from selling an additional unit. However, in certain situations, such as when the market is highly competitive, marginal revenue may be negative, indicating a decrease in revenue from selling an additional unit.

Overall, marginal revenue is a crucial concept for businesses as it helps them determine the optimal level of production and pricing strategies to maximize their profits. By understanding the change in revenue associated with each additional unit of output, firms can make informed decisions regarding their production and pricing policies.

Utility is measured in terms of?
  • a)
    Centimeter
  • b)
    Seconds
  • c)
    Gram
  • d)
    Utils
Correct answer is option 'D'. Can you explain this answer?

Alok Mehta answered
It can be seen that utility is measured in numbers that are purely cardinal, rather than ordinal. The numbers used to measure utility (often in a unit called the "util") is useful only for comparison.

Consumer’s surplus is also known as?
  • a)
    Buyer’s surplus
  • b)
    Elasticity of demand
  • c)
    Differential surplus
  • d)
     Indifference surplus
Correct answer is option 'A'. Can you explain this answer?

Arun Khanna answered
Consumer surplus is defined as the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e. the market price) it is also known as buyer 's surplus.

Under monopoly form of market, TR is maximum when
  • a)
    MR is maximum
  • b)
    MR<0
  • c)
    MR>0
  • d)
    MR is zero
Correct answer is option 'D'. Can you explain this answer?

Aryan Khanna answered
Marginal revenue means additional revenue generate/received from the sale of additional unit of output.In imperfect (monopoly) when TR increases MR decreases , when TR become maximum MR reaches to zero.

A resource is a
  • a)
    Service only
  • b)
    Good only
  • c)
    Good or a service
  • d)
    Not a good or a service
Correct answer is option 'C'. Can you explain this answer?

Pallavi Chopra answered
A resource is good or a service because we can extract the resources from nature which can be used as a good . example : cotton is obtained from nature which we wear as a cloth so it is a good.

Price discrimination can take place only in
  • a)
    Perfect competition
  • b)
    Oligopoly
  • c)
    Monopolistic competition
  • d)
    Monopoly
Correct answer is option 'D'. Can you explain this answer?

Pooja Kumari answered
Monopoly.... ... A discriminating monopoly is a single entity that charges different prices—typically, those that are not associated with the cost to provide the product or service—for its products or services for different consumers. Non-discriminating monopolies, on the other hand, do not engage in such a practice

In perfect competition, since the firm is a price taker, the ________ curve is straight line
  • a)
    Total cost
  • b)
    Marginal cost
  • c)
    Total revenue
  • d)
    Marginal revenue
Correct answer is option 'D'. Can you explain this answer?

Aryan Khanna answered
Marginal revenue is the extra revenue generated when a perfectly competitive firm sells one more unit of output. The marginal revenue received by a firm is the change in total revenue divided by the change in quantity.
Perfect competition is a market structure with a large number of small firms, each selling identical goods. Perfectly competitive firms have perfect knowledge and perfect mobility into and out of the market. These conditions mean perfectly competitive firms are price takers, they have no market control and receive the going market price for all output sold.
Since they are the price takers and have no control over price but just the production, so even if they increase their quantity of production, still the price will remain constant and so does the marginal revenue.

At what point does total utility starts diminishing?
  • a)
    When marginal utility remains constant
  • b)
    When marginal utility is increasing
  • c)
     When marginal utility is negative
  • d)
    When marginal utility is negative
Correct answer is option 'D'. Can you explain this answer?

Kiran Mehta answered
The law of diminishing marginal utility is a law of economics stating that as a person in creases consumption of a products while keeping consumption of other product costant , there is a decline in the marginal utility that persob derives from consuming each additional unit of product.

The concept of marginal utility was developed by?
  • a)
    Paul Samuelson
  • b)
    Alfred Marshall
  • c)
    Hicks & Allen
  • d)
    Robbins
Correct answer is option 'B'. Can you explain this answer?

Aryan Khanna answered
The concept of marginal utility grew out of attempts by economists to explain the determination of price. The term “marginal utility”, credited to the Austrian economist Friedrich von Wieser by Alfred Marshall, was a translation of Wieser's term “Grenznutzen” (border-use).

During excess demand
  • a)
    Market price is lower than the equilibrium price
  • b)
    Market price is higher than the equilibrium price
  • c)
    Market price is same as the equilibrium price
  • d)
    None of these
Correct answer is option 'A'. Can you explain this answer?

Arun Khanna answered
Excess Demand: 
Excess demand refers to the situation when aggregate demand (AD) is more than the aggregate supply (AS) corresponding to full employment level of output in the economy. It is the excess of anticipated expenditure over the value of full employment output.

Which of the following utility approach is based on the theory of Alfred Marshall?
  • a)
    Independent variable approach
  • b)
    Cardinal utility approach
  • c)
    Ordinal utility approach
  • d)
    None of these
Correct answer is option 'B'. Can you explain this answer?

Ishan Choudhury answered
The Cardinal Utility approach is propounded by neo-classical economists, who believe that utility is measurable, and the customer can express his satisfaction in cardinal or quantitative numbers, such as 1,2,3, and so on.  Here, one Util is equivalent to one rupee and the utility of money remains constant.

 _____________ is defined as the difference between what the consumer is willing to pay for a product and what he actually pays?
  • a)
    Consumer surplus
  • b)
    Price gap
  • c)
    Consumer burden
  • d)
    Optimum price
Correct answer is option 'A'. Can you explain this answer?

Devansh Goyal answered
The consumer surplus is the difference between the highest price a consumer is willing to pay and the actual market price of the good. The producer surplus is the difference between the market price and the lowest price a producer would be willing to accept. For producers, a surplus can be thought of as profit, because producers usually don't want to produce at a loss. The two together create an economic surplus.

During deficient demand
  • a)
    Competition among sellers start
  • b)
    Competition in the government start
  • c)
    Competition among buyers start
  • d)
    Competition among exporters start
Correct answer is option 'A'. Can you explain this answer?

Om Desai answered
Excess Demand. When at the current price level, the quantity demanded is more than quantity supplied, a situation of excess demand is said to arise in the market. Excess demand occurs at a price less than the equilibrium price.

This a MCQ (Multiple Choice Question) based practice test of Chapter 4 - Theory of Firm Under Perfect Competition of Economics of Class XII (12) for the quick revision/preparation of School Board examinations
Q  Condition for producer equilibrium is:
  • a)
    TC=TSC
  • b)
    MC=MR
  • c)
    TR=TVC
  • d)
    None of above
Correct answer is 'B'. Can you explain this answer?

Puja Nambiar answered
Condition for Producer Equilibrium

The producer equilibrium is a situation where a firm is maximizing its profits by producing a level of output where marginal cost (MC) is equal to marginal revenue (MR). In other words, the producer equilibrium is reached when a firm is producing at the point where it is making the highest possible economic profit.

The condition for producer equilibrium is as follows:

MC = MR

Explanation

Marginal cost (MC) is the additional cost of producing one more unit of output. Marginal revenue (MR) is the additional revenue earned by selling one more unit of output. In perfect competition, a firm is a price taker, meaning it cannot influence the market price of the product it sells. Therefore, the price of the product remains constant for the firm.

In perfect competition, the firm's marginal revenue (MR) is equal to the price of the product. Therefore, the condition for producer equilibrium can be rephrased as:

MC = P

where P is the price of the product.

If a firm produces at a level where MC is less than MR, it means that the firm can increase its profits by producing more units of output. Similarly, if a firm produces at a level where MC is greater than MR, it means that the firm can increase its profits by producing fewer units of output. So, the producer equilibrium is reached only when MC is equal to MR, where the firm is producing the level of output that maximizes its profits.

Conclusion

The condition for producer equilibrium is MC = MR, where a firm is producing the level of output that maximizes its profits. In perfect competition, where a firm is a price taker, the condition can be rephrased as MC = P.

The slope of price line throughout its length?
  • a)
    Remains the same
  • b)
    Is equal on the other side of the mid points
  • c)
    Differs from point to point
  • d)
    None of above
Correct answer is option 'A'. Can you explain this answer?

Ishan Choudhury answered
This is because in perfect competition , price line is a straight line. And the ratio (∆TR/∆Q )That is change in total revenue and change in output is constant.{MR=AR}So slope of a straight line is always constant.

If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to:
  • a)
    Increase
  • b)
    Decrease
  • c)
    Remain the same
  • d)
    Become zero
Correct answer is option 'A'. Can you explain this answer?

Naina Sharma answered
Since,the demand of the good is inelastic. So,even if the price will increase the consumer will not decrease the consumption of that good.They will continue to purchase that goods. Due to this the production will go on.And so,the expenditure will increase.

Other name by which average revenue curve known:
  • a)
    Indifference curve
  • b)
    Profit curve
  • c)
    Average cost curve
  • d)
    Demand curve
Correct answer is option 'D'. Can you explain this answer?

Aryan Khanna answered
Average revenue curve is often called the demand curve due to its representation of the product's demand in the market. Each point on the curve represents the price of the product in the market. Price determines the demand for a product, hence Average revenue curve is also demand curve.
Assuming it is a perfect competitive market.

The firm and the industry are one and the same in:
  • a)
    Monopolistic competition
  • b)
    Monopoly
  • c)
    Duopoly
  • d)
    Oligopoly
Correct answer is option 'B'. Can you explain this answer?

Priya Patel answered
A type of market structure, where the firm has absolute power to produce and sell a product or service having no close substitutes. In simple terms, monopolised market is one where there is a single seller, selling a product with no near substitutes to a large number of buyers. As the firm and industry are one and the same thing in the monopoly market, so it is a single-firm industry. There is zero or negative cross elasticity of demand for a monopoly product. Monopoly can be found in public utility services such as telephone, electricity and so on.

In the long run the market price of a commodity is equal to its minimum average cost of production under the___________?
  • a)
    Monopolist competition
  • b)
    Perfect competition
  • c)
    Oligopoly
  • d)
    Monopoly
Correct answer is option 'B'. Can you explain this answer?

Kiran Mehta answered
Perfect competition is an industry structure in which there are many firms producing homogeneous products.
None of the firms are large enough to influence the industry. In the long-run, companies that are engaged in a perfectly competitive market earn zero economic profits.
The long-run equilibrium point for a perfectly competitive market occurs where the demand curve (price) intersects the marginal cost (MC) curve and the minimum point of the average cost (AC) curve.
Since they are the price takers and the price remains constant so does the AC of production.

The general shape of TPP in the short run is
  • a)
    V- shaped
  • b)
    Hyperbola
  • c)
    U shaped
  • d)
    Inverse U shaped
Correct answer is option 'D'. Can you explain this answer?

Naina Sharma answered
Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped.

Chapter doubts & questions for Microeconomics - Indian Economy for State PSC Exams 2024 is part of BPSC (Bihar) exam preparation. The chapters have been prepared according to the BPSC (Bihar) exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for BPSC (Bihar) 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.

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