Managerial Economics, Allen, Test Bank and Solutions, CH 1
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Test Bank and solutions, managerial economics, CH11
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Managerial Economics, Test Bank and solutions, Allen, CH 2
First Periodical Test Tl.e Home EconomicsFull description
“Achieve Success Through OMTEX CLASSES The Home of Text”
Weekly Test No: - 1
{ ECONOMICS}
1. Fill in the Blanks (5 Marks) 1. Micro Economics is known as ______________ Economy. 2. ____________ is the unique features of monopolistic competition. (Product differentiation, Product homogeneity) 3. There exist ______________ price in a perfectly competitive market. (uniform, differentiated) 4. Land is ___________ in supply. 5. An Accident in a Factory is a ______________ risk (insurable, Non-insurable) 2. Match the column (6 Marks) 1. 2. 3. 4. 5. 6.
Column A Land Labour Capital Passive Factor Risk Bearer Active Factor
Column b 1. Profit 2. Interest 3. Wage 4. Rent 5. Entrepreneur 6. Capital 7. Land 8. Labour
3. Say true or False (5 Marks) 1. 2. 3. 4. 5.
Labour cannot be stored All risks are Insurable Profit is the reward for bearing risks only Utility can be measured cardinally Utility is objective concept
4. Do you agree or not (12 marks) 1. 2. 3. 4.
Macro Means Small Micro Economics is the theory of Growth Services of house wives are not included in the National Income Micro Economics is the aggregate economy.
5. Write Short notes (any 4) 1. 2. 3. 4. 5.
Features of Micro Economics Peculiarities of Land Peculiarities of Labour Features of Perfect competition Features of Monopolistic Competition
6. Distinguish Between 1. Micro V/S Macro 2. Perfect competition V/S Monopoly Best of Luck
“Achieve Success Through OMTEX CLASSES The Home of Text” No Name of the Student 1. J. Saranya 2. 3. 4. 5. 6. 7. 8. 9. 10 . 11. 12 . 13 . 14 . 15 . 16 . 17 . 18 . 19 . 20 . 21 . 22 . 23 . 24 . 25 . 26 . 27 . 28 . 29 . 30 . 31
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“Achieve Success Through OMTEX CLASSES The Home of Text” . 32 . 33 . 34 . 35 . 36 .
“Achieve Success Through OMTEX CLASSES The Home of Text” 1. State and Explain LAW OF DIMINISHING MARGINAL UTILITY and its Assumptions and Exceptions. The law of diminishing Marginal utility is one of the fundamental laws in economics, advocated by Prof. Alfred Marshal. The law explains the human behaviour in relation to consumption of goods. A consume buys a commodity because it gives him some satisfaction. In he words of Marshal the Law states that, “Other thing being equal, with every increase in the stock of a commodity consumed, its marginal utility diminishes.” The law of diminishing Marginal Utility can be explained with the help of a schedule and a diagram. Units of consumption 1 2 3 4 5 6 7
Total Utility (T.U) 10 18 24 28 30 30 28
Marginal Utility(M.U) 10 8 6 4 2 0 -2
The schedule shows that with every increase in the units of Consumption, the total utility is increasing. It reaches Maximum with the 5th & 6th unit and remains the same, but with 7th unit the total utility decreases from 30-28.The Marginal Utility can be derived from total utility. It is observed the Marginal Utility is falling continuously. It reaches zero and then become negative. The Marginal Utility is Zero when total utility is Maximum and Marginal utility is negative when total utility is falling.
In the above diagram X- Axis represents units of consumption and Y-Axis represents Marginal Utility. Various points from the table are plotted on graph. Join those points we can get a curve known as Marginal utility curve. The curve slopes down wards from left to right. It touches X- axis and becomes negative. It is observed from the diagram that at 6th unit of consumption the marginal utility becomes zero, when the total utility becomes maximum. It is the point of Satiety i.e. the want is completely satisfied and its intensity is nil. With the 7th unit of consumption the total utility started falling and the Marginal Utility becomes negative.
“Achieve Success Through OMTEX CLASSES The Home of Text” ASSUMPTION TO THE LAW OF DIMINISHING MARGINAL UTILITY. 1. Homogeneous Units: -The law of Diminishing Marginal utility will be true only when the units of a commodity consumed are homogeneous or identical in all respect i.e. same size, colour and taste etc. 2. Suitable and reasonable size: - The units of a commodity consumed must be of standard units. They should not be too small or too big for e.g. the law of diminishing marginal utility of water is counted in number of glasses and not in drops or spoons of water. 3. Continuous consumption: - There is no time gap or time interval between the consumption of two units. It is assumed that the consumer has many units continuously and he gets lesser marginal utility with every additional unit. For e.g. a person eats mangoes one after another without any time interval. 4. Rationality: -The consumer is a rational human being. Whose behaviour is normal. He can take decision by himself according to the changing circumstances. 5. Taste and preference remain unchanged: - the like and dislikes of the consumer remains the same during the period. No new habit should be started and no old habit should be dropped by the consumer. 6. Income is constant: - It is also assumed that the money income of the consumer and marginal utility of money also remain constant. It is because of income changes that additional commodity consumed may be superior and hence give more utility than the first one. 7. Utility can be measured: -Marshallian's Utility analysis is based on the assumption that utility can be measured in cardinal number. EXCEPTIONS TO THE LAW OF DIMINISHING MARGINAL UTILITY 1. Hobbies: - It is observed that law of Diminishing Marginal Utility is not applicable in case of Hobbies. Many people are interested in rare collection of Stamps, old coins etc. The person who is found of doing that will get more and more satisfaction with every additional item. 2. Money: - It is generally argued that in case of Money, as the stock of Money increases the Utility from additional Money goes on increasing instead of diminishing. As money represent general purchasing power of a commodity. 3. Music & Books: - A music lover may get more marginal utility with more number of songs if the song is not repeated. As well as a scholar reading books may also get more satisfaction with every additional book, provided the books are not same. 4. Love and Affection: -In case of love and affection of a mother toward the children goes on increasing instead of diminishing. Hence the law of diminishing marginal utility is not applicable to love and affection. 5. Drunkards: -The law of Diminishing marginal utility is inapplicable in case of Drunkards. As the intoxication of a drunkards increase with every successive dose or liquor. He gets more and more satisfaction as he drinks more and more liquor. 6. Miser: - In case of miser, his greed increases with every increase in the stock of goods or money and hence Marginal utility goes on increasing instead of diminishing with more and more use of money or goods.
“Achieve Success Through OMTEX CLASSES The Home of Text”
