Test: Introduction To Economics - 1

A good in economics is any object or product (factors of production) that is useful. A commodity is one kind of good. A good that cannot be used by consumers directly, such as an office building or capital equipment, can be called a good because it can be useful if it is sold.

So option A is correct.

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.

So option C is correct.

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.

So option D is correct.

C: A household is a group of one or more people living together and sharing a common budget. A family is a type of household, but it specifically refers to a group of people related by blood or marriage living together in the same dwelling. An organization is a group of people working together to achieve a common goal, such as a business or non-profit. All commodities in a house refers to all the items or possessions in a house, but it is not a term that is used to describe a group of people living together.

So option C is correct.

The law of diminishing marginal returns states that, at some point, adding an additional factor of production results in smaller increases in output. With other production factors constant, adding additional workers beyond this optimal level will result in less efficient operations.

So option C is correct.

Interest received on investment is typically considered an investing activity and is therefore added to the income statement. Financing activities refer to activities that involve the issuance and repayment of debt and equity, such as borrowing money or issuing stock. Deducting an amount from the income statement would mean that it is being subtracted from the total income, which is not the case for interest received on investment.

So option A is correct.

The origin of the prefix micro- is an ancient Greek word which meant “small.” This prefix appears in no “small” number of English vocabulary words; microphone, microwave, and micromanager are a few noteworthy examples.

So option A is correct.

Sale of shares of other company are part of investment which is now sold by the company. It is sale of investment, so it will take place in investing activity.

So option B is correct.

Loose tools and stores and spares are typically considered part of a company's inventory. Inventory refers to the raw materials, work-in-progress, and finished goods that a company holds for sale. Cash and cash equivalents are highly liquid assets that can be easily converted into cash, such as cash on hand, short-term investments, and other assets that can be quickly converted into cash. Other current assets are assets that are expected to be converted into cash or used up within one year or the company's operating cycle, whichever is longer. Investments refer to assets that are acquired with the intention of generating income or capital appreciation, such as stocks, bonds, or real estate.

So option B is correct.

The percentage change in the quantity demanded divided by the percentage change in price is coefficient of elasticity.

So two linear and parallel demand curves will have the same coefficient of elasticity and the changes in price w.r.t changes in quantity demanded will be the same.

Hence, B is the correct option.