Economics general knowledge with solutions and explanations.
1. Average Revenue means
(1) the revenue per unit of commodity sold
(2) the revenue from all commodities sold
(3) the profit realized from the marginal unit sold
(4) the profit realized by sale of all commodities
Definition;
Average revenue is the revenue per unit of the commodity sold. It can
be obtained by dividing the TR by the number of units sold. Then, AR =
TR/Q AR. In other words, it means price. Since the demand curve shows
the relationship between price and the quantity demanded, it also
represents the average revenue or price at which the various amounts of
a commodity are sold, because the price offered by the buyer is the
revenue from the seller's point of view. Therefore, the average revenue
curve of the firm is the same as the demand curve of the consumer.
2. Economic rent refers to
(1) Payment made for the use of labor
(2) Payment made for the use of capital
(3) Payment made for the use of organization
(4) Payment made for the use of land
Definition;
Rent refers to that part of payment by a tenant which is made only for
the use of land, i.e., free gift of nature. The payment made by an
agriculturist tenant to the landlord is not necessarily equals to the
economic rent. A part of this payment may consist of interest on capital
invested in the land by the landlord in the form of buildings, fences, tube
wells, etc. The term ’economic rent’ refers to that part of payment which
is made for the use of land only, and the total payment made by a tenant
to the landlord is called ‘contract rent’. Economic rent is also called
surplus because it emerges without any effort on the part of a landlord.
, 3. If the price of an inferior good falls, its demand
(1) rises
(2) falls
(3) remains constant
(4) can be any of the above
Definition;
Some goods are known as inferior goods. With inferior goods, there is
an inverse relationship between real income and the demand for the
good in question. If real incomes rise, the demand for an inferior good
will fall. If real incomes fall (in a recession, for instance), the demand for
an inferior good will rise. Example: Bus travel. As people get richer, they
are more likely to buy themselves a car, or use a taxi, rather than rely on
the inferior bus, so the demand for bus travel falls as real incomes rise.
4. The Marginal Utility Curve slopes downward from left to right
indicating
(1) A direct relationship between marginal utility and the stock of
commodity
(2) A constant relationship between marginal utility and the stock of
commodity
(3) A proportional relationship between marginal utility and the stock of
commodity
(4) An inverse relationship between marginal utility and the stock of
commodities.
Definition;
The Marginal Utility Curve is a curve illustrating the relation between the
marginal utility obtained from consuming an additional unit of good and
the quantity of the good consumed. The negative slope of the marginal
utility curve reflects the law of diminishing marginal utility. The marginal
utility curve also can be used to derive the demand curve. Marginal
Utility is the utility derived from the last unit of a commodity purchased.
One of the earliest explanations of the inverse relationship between price
and quantity demanded is the law of diminishing marginal utility. This law
suggests that as more of a product is consumed the marginal
(additional) benefit to the consumer falls; hence consumers are prepared
to pay less.
1. Average Revenue means
(1) the revenue per unit of commodity sold
(2) the revenue from all commodities sold
(3) the profit realized from the marginal unit sold
(4) the profit realized by sale of all commodities
Definition;
Average revenue is the revenue per unit of the commodity sold. It can
be obtained by dividing the TR by the number of units sold. Then, AR =
TR/Q AR. In other words, it means price. Since the demand curve shows
the relationship between price and the quantity demanded, it also
represents the average revenue or price at which the various amounts of
a commodity are sold, because the price offered by the buyer is the
revenue from the seller's point of view. Therefore, the average revenue
curve of the firm is the same as the demand curve of the consumer.
2. Economic rent refers to
(1) Payment made for the use of labor
(2) Payment made for the use of capital
(3) Payment made for the use of organization
(4) Payment made for the use of land
Definition;
Rent refers to that part of payment by a tenant which is made only for
the use of land, i.e., free gift of nature. The payment made by an
agriculturist tenant to the landlord is not necessarily equals to the
economic rent. A part of this payment may consist of interest on capital
invested in the land by the landlord in the form of buildings, fences, tube
wells, etc. The term ’economic rent’ refers to that part of payment which
is made for the use of land only, and the total payment made by a tenant
to the landlord is called ‘contract rent’. Economic rent is also called
surplus because it emerges without any effort on the part of a landlord.
, 3. If the price of an inferior good falls, its demand
(1) rises
(2) falls
(3) remains constant
(4) can be any of the above
Definition;
Some goods are known as inferior goods. With inferior goods, there is
an inverse relationship between real income and the demand for the
good in question. If real incomes rise, the demand for an inferior good
will fall. If real incomes fall (in a recession, for instance), the demand for
an inferior good will rise. Example: Bus travel. As people get richer, they
are more likely to buy themselves a car, or use a taxi, rather than rely on
the inferior bus, so the demand for bus travel falls as real incomes rise.
4. The Marginal Utility Curve slopes downward from left to right
indicating
(1) A direct relationship between marginal utility and the stock of
commodity
(2) A constant relationship between marginal utility and the stock of
commodity
(3) A proportional relationship between marginal utility and the stock of
commodity
(4) An inverse relationship between marginal utility and the stock of
commodities.
Definition;
The Marginal Utility Curve is a curve illustrating the relation between the
marginal utility obtained from consuming an additional unit of good and
the quantity of the good consumed. The negative slope of the marginal
utility curve reflects the law of diminishing marginal utility. The marginal
utility curve also can be used to derive the demand curve. Marginal
Utility is the utility derived from the last unit of a commodity purchased.
One of the earliest explanations of the inverse relationship between price
and quantity demanded is the law of diminishing marginal utility. This law
suggests that as more of a product is consumed the marginal
(additional) benefit to the consumer falls; hence consumers are prepared
to pay less.
