Very Short Questions Fall 2016
The answers to the Very Short Questions Fall 2016 are given below:
1. What is microdynamics?
ANS- Microdynamics deals with the time path and process of the adjustment itself. It studies the activities of the variable during the time of adjustment from one equilibrium position to another.
2. Why the law of demand is not applicable in the case of shifts in the demand curve?
ANS- In microeconomics, the law of demand is a fundamental principle which states that there is an inverse relationship between price and quantity demanded. The law of demand, however, only makes a qualitative statement in the sense that it describes the direction of change in the amount of quantity demanded but not the magnitude of change.
3. Why the indifference curve is convex to origin?
ANS- The indifference curve is convex to the origin because you receive less satisfaction for consuming increasingly large quantities of something. Essentially, it is the concept of diminishing returns. If you are hungry and you eat one cookie, the difference in pleasure will be massive between receiving nothing and receiving one cookie.
4. Define and derive the budget line with a proper example.
ANS- A budget line is a straight line that slopes downwards and consists of all the possible combinations of the two goods which a consumer can buy at a given market price by allocating all his/her income.
5. Define the Marginal Rate of Technical Substitution (MRTS).
ANS- The marginal rate of technical substitution (MRTS) is an economic theory that illustrates the rate at which one factor must decrease so that the same level of productivity can be maintained when another factor is increased.
6. Why AR & MR curves are horizontal straight line in perfect competition?
ANS- Perfect competition is a form of the market in which there is a large number of buyers and sellers and where homogeneous product is sold at a uniform priceA price taker firm means that it has to accept the price as determined by the .forces of market demand and market supply.Firm’s demand curve under perfect competition is a horizontal straight line parallel to X-axis.Under perfect competition, AR is constant for a firm. Hence, AR = MR.
7. Differentiate nominal wage from real wage.
ANS- Nominal wage, or money wage, is the literal amount of money you get paid per hour or by salary whereas real wage, or adjusted wages, is the amount of pay a person can expect to receive after factoring in the current inflation rate.
8. Write the condition of price discrimination.
ANS- Price discrimination is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. Price differentiation essentially relies on the variation in the customers’ willingness to pay and in the elasticity of their demand.
9. What is a bilateral monopoly?
ANS- A bilateral monopoly is a market structure consisting of both a monopoly (a single seller) and a monopsony (a single buyer).
10. ABC commercial bank pays a higher wage rate for the CEO and a Lower for officers. Why?
ANS- ABC commercial bank pays a higher wage rate to the CEO and lower for officers because to be a CEO they need lots of experience, academic degree, qualification and risk-taking ability.
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