UGC NET ECONOMICS: FACTOR PRICING
1.
Factor pricing theory is also known as:
A) Theory of Value
B) Theory of Cost
C) Theory of Distribution
D) Theory of Exchange
Answer: C
2.
The Marginal Productivity Theory states that each factor is paid:
A) The total value of its contribution
B) According to its marginal product
C) According to average productivity
D) A fixed wage rate
Answer: B
3.
According to Marginal Productivity Theory, a firm is in equilibrium when:
A)
B)
C)
D)
Answer: A
4.
Under perfect competition, the equilibrium condition in factor markets is:
A)
B)
C)
D)
Answer: A
5.
Value of Marginal Product (VMP) equals:
A)
B)
C)
D)
Answer: B
6.
When product market is imperfect, the relationship between VMP and MRP is:
A)
B)
C)
D)
Answer: C
7.
The demand for a factor is:
A) Autonomous
B) Independent
C) Derived demand
D) Complementary demand
Answer: C
8.
Which of the following is not an assumption of the Marginal Productivity Theory?
A) Perfect competition
B) Homogeneous factors
C) Imperfect knowledge
D) Full employment
Answer: C
9.
The Marginal Revenue Product (MRP) of a factor is the:
A) Additional output per extra unit of factor
B) Extra revenue earned from one more unit of factor
C) Average revenue per unit of factor
D) Price per unit of factor
Answer: B
10.
The Marginal Productivity Theory was refined and popularized by:
A) Ricardo and Mill
B) Marshall and Clark
C) Adam Smith and Keynes
D) Hicks and Kaldor
Answer: B
11.
The Modern Theory of Factor Pricing determines factor prices by:
A) Productivity alone
B) Supply of factors alone
C) Interaction of demand and supply of factors
D) Government intervention
Answer: C
12.
When , a profit-maximizing firm should:
A) Employ more of the factor
B) Reduce employment of the factor
C) Keep employment constant
D) Increase factor price
Answer: B
13.
Under monopsony in a labour market, equilibrium occurs when:
A)
B)
C)
D)
Answer: B
14.
Under monopsony, the wage rate is:
A) Higher than in perfect competition
B) Equal to MRP
C) Lower than in perfect competition
D) Always zero
Answer: C
15.
The Ricardian Theory of Rent assumes that rent arises due to:
A) Scarcity of land
B) Fertility differences among lands
C) Monopoly power
D) Labour productivity
Answer: B
16.
According to Ricardo, no-rent land refers to:
A) The most fertile land
B) The least fertile land under cultivation
C) Unused barren land
D) Land with highest productivity
Answer: B
17.
Economic rent is:
A) Payment to land only
B) Surplus over opportunity cost
C) Equal to transfer earnings
D) Dependent on sunk costs
Answer: B
18.
The Modern Theory of Rent (Scarcity Rent) was proposed by:
A) David Ricardo
B) Marshall
C) Hicks
D) Robbins
Answer: B
19.
The Subsistence Theory of Wages was given by:
A) J.S. Mill
B) Ricardo
C) David Ricardo and Lassalle
D) Adam Smith
Answer: C
20.
According to Marginal Productivity Theory of Wages, the wage rate equals:
A) Average productivity of labour
B) Marginal revenue productivity of labour
C) Total revenue divided by number of workers
D) Wage fund per worker
Answer: B
21.
The Loanable Funds Theory explains the determination of:
A) Rent
B) Wage
C) Interest rate
D) Profit
Answer: C
22.
According to Loanable Funds Theory, the rate of interest is determined by:
A) Demand and supply of loanable funds
B) Marginal productivity of capital
C) Government policy
D) Saving alone
Answer: A
23.
The Keynesian Liquidity Preference Theory suggests that:
A) Interest is reward for saving
B) Interest is reward for productivity
C) Interest is reward for parting with liquidity
D) Interest equals rate of return on capital
Answer: C
24.
According to Knight’s Risk Theory, profit is:
A) A reward for innovation
B) A return for bearing uncertainty
C) A payment for management
D) A premium on capital
Answer: B
25.
According to Schumpeter’s Innovation Theory, profit arises due to:
A) Monopoly power
B) Risk-taking
C) Innovations and technological changes
D) Labour productivity
Answer: C
26.
In general equilibrium, factor prices are determined:
A) Independently in each market
B) Simultaneously in all markets
C) By the government only
D) By consumer preferences
Answer: B
27.
In a perfectly competitive factor market, the supply curve of a factor is:
A) Perfectly elastic
B) Perfectly inelastic
C) Backward bending
D) Upward sloping
Answer: A
28.
Under imperfect product markets, the MRP curve lies:
A) Above VMP curve
B) Below VMP curve
C) Coincides with VMP curve
D) Equal to average cost curve
Answer: B
29.
When demand for labour increases while supply remains constant, equilibrium wage will:
A) Fall
B) Rise
C) Remain same
D) Become negative
Answer: B
30.
In a bilateral monopoly (one buyer and one seller of labour), wages are determined by:
A) Government policy
B) Collective bargaining
C) Marginal productivity
D) Random negotiation
Answer: B