Economics - Study Mode

[#146] Which of the following is a cause of an economic problem?
Correct Answer

(D) All of the above

Explanation

Solution: Scarcity of resources, Alternative uses and Unlimited wants are the cause of an economic problem. Factors like production costs and labor affect the cost of scarce items. If the unlimited wants and needs of a particular good can be met by resources, then it is not considered scarce. This would require the resources to be unlimited as well for it to meet unlimited demand.

[#147] Calculate income elasticity for the household when the income of a household rises by 10% and the demand for Rice rises by 5%.
Correct Answer

(B) 0.5

Explanation

Solution: Income elasticity for the household when the income of a household rises by 10% and the demand for Rice rises by 5% is 0.5. Income Elasticity = (% change in quantity demanded) / (% change in income).

[#148] When two goods are perfect substitutes of each other, then
Correct Answer

(C) MRS is constant

Explanation

Solution: When two goods are perfect substitutes of each other, then MRS is constant. Two commodities are perfect substitutes for each other – In this case, the indifference curve is a straight line, where MRS is constant.

[#149] In the long run, normal profits are included in the _____ curve
Correct Answer

(A) LAC

Explanation

Solution: In the long run, normal profits are included in the LAC curve. Long run average cost (LAC) can be defined as the average of the LTC curve or the cost per unit of output in the long run.

[#150] One common definition of luxury goods is goods with an income elasticity
Correct Answer

(A) greater than one