Question 1

Of 'real wages' and 'money wages'
A)The former is a wider concept than the latter
B)The latter is a wider concept than the former
C)Both concept mean the same thing
D)All of the above

Accepted Answer

Real wages refer to the purchasing power of wages, i.e., the quantity of goods and services that can be bought with a given amount of money wages, making it a broader concept that accounts for inflation and cost of living, unlike money wages which only refer to the nominal amount of money earned.

Question 2

The concept of Quasi-rent mean
A)The rent to the workers
B)The rent shared by the Landlord and workers
C)The interest paid to the entrepreneur
D)The return to a factor of production which is fixed in supply in the short period

Accepted Answer

Quasi-rent refers to the return to a factor of production that is temporarily fixed in supply in the short run, generating earnings above its opportunity cost due to its inelastic supply.

Question 3

The return to a factor of production which is fixed in supply in the short period is called
A)Scarcity rent
B)Economic rent
C)Quasi-rent
D)Contractual rent

Accepted Answer

C

Question 4

The marginal productivity theory of distribution was firstly formulated in its complete form by
A)Adam Smith
B)J. S. Mill
C)J. B. Clark
D)David Ricardo

Accepted Answer

The marginal productivity theory of distribution, which explains how the prices of factors of production are determined, was first fully formulated by J. B. Clark.

Question 5

The 'iron law of wages' is
A)The wage-fund theory
B)The marginal productivity theory of wages
C)Collective bargaining
D)The subsistence theory of wages

Accepted Answer

The 'iron law of wages' is associated with the subsistence theory of wages, which suggests that wages naturally tend to a level just sufficient to keep workers alive and able to work.

Question 6

According to Prof Knight, profit is the reward for
A)Innovation
B)Capital
C)Foreseeable risks
D)Uncertainty bearing

Accepted Answer

According to Prof. Frank H. Knight, profit is primarily seen as the reward for bearing uncertainty, not just for innovation, capital, or foreseeable risks. Knight distinguished between risk (which can be quantified and thus insured against) and true uncertainty, which cannot be accurately measured or fully anticipated.

Question 7

The uncertainty-bearing theory of profit was propounded by
A)F. H. Knight
B)F. B. Hawley
C)P. A. Samuelson
D)Joseph Schumpeter

Accepted Answer

F. H. Knight propounded the uncertainty-bearing theory of profit, which suggests that profit is the reward for bearing uncertainty in business.

Question 8

Which of the following is not included in the assumptions of Clark's marginal productivity of distribution
A)Perfect competition
B)Constant population
C)Constant amount of capital
D)Labour is heterogeneous

Accepted Answer

Clark's marginal productivity theory of distribution assumes perfect competition, a constant population, and a constant amount of capital. It does not assume labor is heterogeneous; instead, it typically assumes labor is homogeneous for simplification.

Question 9

Marginal productivity theory is also called
A)Real theory
B)Classical theory
C)Monetary theory
D)None of the above

Accepted Answer

Marginal productivity theory is also known as the real theory because it explains how the distribution of income is determined by the productivity of the factors of production in real terms, without focusing on monetary aspects.

Question 10

Subsistence theory of wages was used by
A)Karl Marx
B)Robinson
C)J. S. Mill
D)David Ricardo

Accepted Answer

David Ricardo is associated with the subsistence theory of wages, which suggests that wages tend to gravitate towards the minimum level necessary for workers to sustain their basic needs.

Question 11

Profit is also known as
A)Contractual rent
B)Residual income
C)Net income
D)None of the above

Accepted Answer

Profit is often referred to as residual income, which is the income remaining after all expenses have been deducted from total revenue.

Question 12

Changes in the rate of interest affect the amount of money held for
A)transaction motive
B)precautionary motive
C)speculative motive
D)normal motive

Accepted Answer

The speculative motive for holding money is influenced by interest rates, as people may choose to hold money or invest in interest-bearing assets based on expected returns.

Question 13

The marginal productivity theory of distribution is associated with
A)Adam Smith
B)Lionel Robbins
C)J. B. Clark
D)Bergson

Accepted Answer

The marginal productivity theory of distribution is primarily associated with J. B. Clark, who argued that every factor of production is paid the value of its marginal product.

Question 14

Who has contributed the modem theory of interest rate determination?
A)Paul A. Samuelson
B)Gunnar Myrdal
C)Knut Wicksell
D)J.R. Hicks

Accepted Answer

J.R. Hicks is known for his contributions to the modern theory of interest rate determination, particularly through his IS-LM model which integrates interest rates with macroeconomic equilibrium.

Question 15

Whose name is associated with the "Uncertainty-bearing theory of profit"?
A)J. Schumpeter
B)F.H. Knight
C)J.B. Clark
D)F.W. Watker

Accepted Answer

The "Uncertainty-bearing theory of profit" is associated with Frank H. Knight. He argued that profits are the reward for bearing the uncertainty in business, distinguishing between risk (which can be measured and thus insured) and true uncertainty (which cannot be measured and thus requires entrepreneurial judgment).

Question 16

Who has sought to measure Consumer's Surplus with the help of indifference curve technique?
A)Edgeworth
B)Alfred Marshall
C)J.R. Hick
D)Pareto

Accepted Answer

J.R. Hick is known for attempting to measure Consumer's Surplus using the indifference curve technique, which was a significant development in microeconomic theory.

Question 17

Which among the following is NOT an assumption of Pareto optimality?
A)Every consumer wishes to maximize his level of satisfaction.
B)All the factors of production are used in the production of every commodity.
C)Conditions of perfect competition exist making all the factors of production perfectly mobile
D)The concept of utility is cardinal and cardinal utility function of every consumer is given.

Accepted Answer

Pareto optimality does not assume cardinal utility; it is based on ordinal utility where preferences are ranked rather than measured.

Question 18

When a firm's average revenue is equal to its average cost, it gets ________.
A)Sub normal profit
B)Normal profit
C)Abnormal profit
D)Super profit

Accepted Answer

When a firm's average revenue is equal to its average cost, it is making normal profit. This situation indicates that the firm is covering all its costs, including opportunity costs, but is not making extra profit above this level.

Question 19

Given the price, if the cost of production increases because of higher price of raw materials, the supply
A)Decrease
B)Increase
C)Remains the same
D)Any of the above

Accepted Answer

When the cost of production increases due to higher prices of raw materials, suppliers are less willing or able to supply the same quantity at the previous price, leading to a decrease in supply.

Question 20

Under __________________, price is determined by the interaction of total demand and total supply in the market.
A)Perfect competition
B)Monopoly
C)Imperfect competition
D)Monopolistic Competition

Accepted Answer

In a perfect competition market structure, price is determined by the interaction of total demand and total supply, as there are many buyers and sellers, none of whom can influence the market price on their own.

Quiz 1: Economic Concepts and Theories

Of 'real wages' and 'money wages'

The concept of Quasi-rent mean

The return to a factor of production which is fixed in supply in the short period is called

The marginal productivity theory of distribution was firstly formulated in its complete form by

The 'iron law of wages' is

According to Prof Knight, profit is the reward for

The uncertainty-bearing theory of profit was propounded by

Which of the following is not included in the assumptions of Clark's marginal productivity of distribution

Marginal productivity theory is also called

Subsistence theory of wages was used by

Profit is also known as

Changes in the rate of interest affect the amount of money held for

The marginal productivity theory of distribution is associated with

Who has contributed the modem theory of interest rate determination?

Whose name is associated with the "Uncertainty-bearing theory of profit"?

Who has sought to measure Consumer's Surplus with the help of indifference curve technique?

Which among the following is NOT an assumption of Pareto optimality?

When a firm's average revenue is equal to its average cost, it gets ________.

Given the price, if the cost of production increases because of higher price of raw materials, the supply

Under __________________, price is determined by the interaction of total demand and total supply in the market.