Question

O(True) or X(False)

(​) 1. A trade-off is a principle for market activities.

(​) 2. A manager's salary is the opportunity cost.

(​) 3. A trade provides a division of labor.

(​) 4. The market failure always results in the negative externality.

(​) 5. An analysis on Trump’s tax policy is the normative analysis.

(​) 6. The demand change due to a related commodity price change is a demand law.

(​) 7. The supply change due to that input price change is a supply law.

(​) 8. The right demand shift results into an increase in equilibrium price.

(​) 9. The price down of necessity goods results in increases of both demand and total revenue.

(​) 10. The price down for long-run results in increases of both demand and total revenue.

(​) 11. A control of gasoline price results in more demand for gasolines than supply.

(​) 12. An indifference curve is a curve of 2 goods purchase not related to satisfaction.

(​) 13. A budget line is a line of 2 goods purchase with a given budget not related to prices.

(​) 14. A budget line shifts left as a budget increases.

(​) 15. The substitution effect of price change is always an inverse relationship.

(​) 16. The income effect of price change is always a positive relationship.

(​) 17. A consumer surplus is the surplus of consumption which a consumer spends for.

(​) 18. A producer surplus is the surplus of producer above the price.

(​) 19. The cost equation is not related to output prices.

(​) 20. The revenue function is related to output..

(​) 21. The export results in extra gain, while the import does not result in extra gain.

(​) 22. The Giffen goods are those whose demand decreases due to price change.

(​) 23. The labor marginal product is the labor productivity.

(​) 24. As the average product decreases, the marginal product decreases always.

(​) 25. The average product and marginal product do not cross each other.

(​) 26. When price elasticity of demand is less than 1, production increase increases revenue.

(​) 27. When price elasticity of demand is greater than 1, productiondecrease decreases revenue.

Answer 1

1 - True (Reason - Trade off is one of the principles in economics which encompasses a situation that involves losing one element of something in return for gaining another element of quality. If one thing gets increased other gets decreased).

2 - False (Reason - what if the manager could run his own business instead of earning a fixed salary in the given point of time; so running his own business is opportunity cost which the manager is paying by working in his office getting a fixed salary).

3 - True (Reason - Separation of work or task in any system so that the workers or employees could learn specialized skills is the division of labor. It is a major reason for the economic growth of a country; trade provides specialized labor according to different skillset required for trade).

4 - True (Reason - if a product's price does not do justice to its benefits or the service which it offers to consumers will lead to product failure. This type of thing disturbs the benefit and cost equilibrium creating negative externality).

5 - False (Reason - Normative analysis originates from a personal perception of people, their feelings and opinion on a particular subject, for example - family healthcare plan should be compulsory for all citizens of the US. However, the question statement is false because it is positive analysis and the analysis is based on the quantification, description, and expectations from Trump's tax reforms).

6 - True (Reason- the meaning is in the statement itself, the Law of demand states that other factors being constant: change in the price of a commodity affects the demand).

7 - True ( The supply change due to that input price change is a supply law ).

8 - False ( Equilibrium price is the market price at which demand = supply and both lines intersect, rise in the equilibrium price will lower the demand leading to shifting of the curve to left not right side)

9 - False ( Necessity goods are important for the survival of humans are basic goods like bread, salt and medicine. Change in price of these goods will not affect the demand for these goods).

10 - False (Not necessarily, as there could be many arguments for this statement. In my opinion, in the long run, market behavior is more elastic than in the short run, so long term low price of a commodity can increase the demand initially only when other factors are kept constant. However, it cannot be said for the revenue part because for the same commodity there might be competitors, increase in production costs etc.)