Economics - Study Mode
[#796] The law of diminishing return is related to
Correct Answer
(B) Marginal product of a variable factor
[#797] For ____ goods, increase in income leads to increase in demand.
Correct Answer
(B) Normal
Explanation
Solution: For normal goods, increase in income leads to increase in demand. Rising incomes lead to a rise in the number of goods demanded by consumers.
[#798] In the case of a Giffen good, the demand curve will be
Correct Answer
(C) Upward to the right
Explanation
Solution: In the case of a Giffen good, the demand curve will be Upward to the right. A Giffen good has an upward-sloping demand curve, which is contrary to the fundamental law of demand, which states that the quantity demanded for a product falls as the price increases, resulting in a downward slope for the demand curve.
[#799] The law of consumer surplus is based on
Correct Answer
(D) The law of diminishing marginal utility
Explanation
Solution: The law of consumer surplus is based on the law of diminishing marginal utility. The concept of consumer surplus is derived from the law of diminishing marginal utility. As per the law, as we purchase more of a commodity, its marginal utility reduces. Since the price is fixed, for all units of the goods we purchase, we get extra utility. This extra utility is consumer surplus.
[#800] An isoquant slopes
Correct Answer
(B) Downward to the right
Explanation
Solution: An isoquant slopes downward to the right. This implies that the Isoquant is a negatively sloped curve. This is because when the quantify of factor K (capital) is increased, the quantity of L (labor) must be reduced so as to keep the same level of output.