Monopoly has close substitutes.
- True
- False
Answer: False
Monopoly is characterized by having no close substitutes.
GK Questions
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Perfect competition has?
- Differentiated products
- Homogeneous products
- Single seller
- Barriers
Answer: Homogeneous products
All firms produce identical/homogeneous products.
Arc elasticity uses?
- Derivative
- Mid-point method
- Percentage method
- Geometric method
Answer: Mid-point method
Uses the average of initial and final values.
Unitary elasticity means total revenue remains ___.
- balance (or sum to zero)
- constant
- indifference
- Total variable cost
Answer: constant
Total revenue is maximized and constant at Ed=1.
Necessities have highly elastic demand.
- True
- False
Answer: False
Necessities have highly inelastic demand.
Price elasticity > 1 means demand is?
- Inelastic
- Elastic
- Unitary
- Perfectly inelastic
Answer: Elastic
Ed > 1 indicates relatively elastic demand.
Consumer equilibrium is where budget line is ___ to IC.
- tangent
- Total receipts excluding borrowings
- low (or zero / no)
- crowding out
Answer: tangent
Tangency ensures MRS equals the price ratio.
Indifference curves intersect.
- True
- False
Answer: False
ICs never intersect due to the property of transitivity.
Slope of indifference curve is?
- MRS
- MRT
- MPC
- MPS
Answer: MRS
Marginal Rate of Substitution represents the slope.
Ordinal utility is associated with ___ curve.
- technological
- John Maynard Keynes
- Pareto Efficiency (or Pareto Optimality)
- indifference
Answer: indifference
Indifference curve shows ordinal ranking of preferences.
Cardinal utility is measurable.
- True
- False
Answer: True
Cardinal approach assigns exact numerical values to utility.
Marginal utility is zero when total utility is?
- Zero
- Minimum
- Maximum
- Negative
Answer: Maximum
Total utility peaks when marginal utility becomes zero.
Point elasticity formula uses?
- Percentage change
- Derivative
- Mid-point
- Logarithm
Answer: Derivative
Point elasticity uses calculus/derivative at a specific point.
Income elasticity for inferior goods is ___.
- Total variable cost
- negative
- decrease (or reduce / lower)
- dumping
Answer: negative
Demand falls as income rises for inferior goods.
Complementary goods have positive cross elasticity.
- True
- False
Answer: False
Complements have negative cross elasticity.
Cross elasticity of demand for substitutes is?
- Positive
- Negative
- Zero
- Infinite
Answer: Positive
If the price of one rises, demand for the other rises.
Rightward shift in demand curve means ___ in demand.
- technological
- 66
- balance (or sum to zero)
- increase
Answer: increase
Rightward shift indicates higher demand at the same price.
Movement along demand curve is due to change in price.
- True
- False
Answer: True
Shifts are due to non-price factors like income.
Exception to law of demand?
- Normal goods
- Giffen goods
- Luxuries
- Substitutes
Answer: Giffen goods
Giffen goods have an upward sloping demand curve.
Veblen goods are also known as ___ goods.
- snob
- 1965
- Net Factor Income from Abroad (NFIA)
- Ways and Means
Answer: snob
Snob/prestige goods violate the basic law of demand.