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CA Foundation Basic Problems of an Economy and Role of Price Mechanism — practice questions

Explore 59 free Basic Problems of an Economy and Role of Price Mechanism questions in CA Foundation Business Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Basic Problems of an Economy and Role of Price Mechanism questions and exercises with answers

Showing questions 1–30 of 59.

Deciding which goods and how much of each to make is the problem ofRead the answer and worked solution →Choosing between labour-intensive and capital-intensive methods addresses which central problem?Read the answer and worked solution →Deciding how national product is shared among individuals and families is the problem ofRead the answer and worked solution →Economic scarcity means thatRead the answer and worked solution →Producing more of one good in a fully employed economy requiresRead the answer and worked solution →With full employment, raising capital goods output requires cutting output ofRead the answer and worked solution →Over the long run, investment in capital goods tends toRead the answer and worked solution →The economic problem of full employment concerns whetherRead the answer and worked solution →In which phase do many people want to work but cannot find jobs?Read the answer and worked solution →The increase in the productive capacity of an economy is calledRead the answer and worked solution →Which one is a neoclassical growth model used to study economic growth?Read the answer and worked solution →Production is efficient only if no reallocation of resources canRead the answer and worked solution →A state where no one can gain without another losing is calledRead the answer and worked solution →Removing an inefficiency is not worthwhile whenRead the answer and worked solution →A price mechanism allocates resources on the basis ofRead the answer and worked solution →Which of these is NOT a function of the price mechanism?Read the answer and worked solution →Which two elements are essential to the price mechanism?Read the answer and worked solution →Under a price mechanism, a rise in demand will tend to causeRead the answer and worked solution →When demand and price rise, producers are likely toRead the answer and worked solution →At competitive equilibrium, marginal benefit equalsRead the answer and worked solution →Marginal benefit equal to marginal cost at equilibrium ensuresRead the answer and worked solution →A price mechanism where bidders make competing offers isRead the answer and worked solution →In an auction, the transaction is normally awarded to theRead the answer and worked solution →Costlier fuel pushes firms toward electric cars, showing price acts as aRead the answer and worked solution →A market economy is one where production and investment followRead the answer and worked solution →A key characteristic of a market economy is the presence ofRead the answer and worked solution →The price where quantity demanded equals quantity supplied is theRead the answer and worked solution →In laissez-faire systems, government largely provides public goods andRead the answer and worked solution →An economy using one economy-wide plan for investment and production isRead the answer and worked solution →Price ceilings and price floors are examples ofRead the answer and worked solution →

Worked practice questions

Deciding which goods and how much of each to make is the problem of

  1. Where to export
  2. How to produce
  3. For whom to produce
  4. What to produce
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Correct answer: D. What to produce

Choosing the kinds and quantities of goods is the first central problem every economy faces.

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Choosing between labour-intensive and capital-intensive methods addresses which central problem?

  1. What to produce
  2. For whom to produce
  3. How to produce
  4. Whether to import
Show answer and solution

Correct answer: C. How to produce

The choice of technique, such as labour or capital intensive methods, is the question of how goods are produced.

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Deciding how national product is shared among individuals and families is the problem of

  1. What to produce
  2. How to produce
  3. Economic growth
  4. For whom to produce
Show answer and solution

Correct answer: D. For whom to produce

Distribution of the total national product among people is the for-whom problem.

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