[B]Personal income taxes
2. In the long-run, a perfectly competitive firm earns only normal profits because of
[A]Product homogeneity in the industry
[B]Large number of sellers and buyers in the industry
[C]Free entry and exit of firms in the industry
[D]Both (a) and (b) above
3. When the Government increases tax on cigarettes, cigarette manufacturers pass on much of the additional tax to consumers in the form of higher prices. This implies that the demand for cigarettes is
[A]Relatively less elastic than supply
[B]Relatively more elastic than supply
[C]As elastic as the supply
4. Which of the following is not an example of a firm’s explicit cost?
[A]Salaries paid to workers
[B]An amount of Rs.500 paid to an employee towards the reimbursement of medical expenses incurred by him
[C]Advertisement expenditure incurred by the firm towards promotion of its branded good, ‘Atoka’
[D]The firm’s owner has given up a job, where he was earning Rs.10,000 per month to run the firm
5. A rice miller can sell as much rice as he wants in the market at the prevailing market price. He knows that even if he increases the price by a small proportion, he will lose the entire market. The slope of the demand curve faced by the miller would be
[D]Between zero and infinity
6. In economics, normal profit means
[A]Zero accounting profit
[B]MR = MC
[C]Zero economic profit
[D]Zero opportunity cost
7. Which of the following costs is not recorded in the books of a firm?
8. When the available resources in an economy are fully employed, expansionary monetary policy normally result in
I. Demand pull inflation.
II. Supply shock inflation.
III. Wage push inflation.
[A]Only (I) above
[B]Only (II) above
[C]Only (III) above
[D]Both (I) and (III) above
9. Which of the following costs remain constant as the output increases?
[B]Average variable cost
[C]Average fixed cost
[D]None of the above
10. In India which of the following best describes a perfectly competitive market?
[C]Soft drinks industry
[D]Toilet soap industry
11. Diseconomies of scale refer to
[A]The forces which reduce the average cost of producing a good as the firm expands the size of its plant
[B]The forces which reduce the marginal cost of producing a good as the firm expands the size of its plant
[C]The forces which increase the average cost of producing a good as the firm expands the size of its plant
[D]The forces which increase the marginal cost of producing a good as the firm expands the size of its plant
12. Which of the following is not true with respect to a perfectly competitive market?
[A]There are many sellers in the market
[B]Individual firms are price makers
[C]Products sold by the firms are identical
[D]Anyone can enter or exit the industry without any difficulty
13. In a two-sector economy, the consumption function (C) is equal to 8 + 0.7Y and autonomous investment is equal to 22. The equilibrium level of income in the economy is
14. Savings function of an economy is S = – 300 + 0.25 Yd. Break-even disposable income for the economy is
15. For a consumer in equilibrium, Marginal Rate of Substitution of good X for good Y (MRSxy) is 3. If price of the good X (Px) is Rs.75, price of the good Y (Py) is