Indian Economy GK Questions with Answers – Page 16

Marginal cost is the addition to total cost from producing one more unit, so for a one unit change it is simply the difference between successive values of total cost.

At that output the firm makes neither profit nor loss in the economic sense and earns only normal profit, since normal profit is already counted in cost as the reward of enterprise.

Both conditions are needed. If marginal revenue exceeds marginal cost the firm gains by producing more, and if marginal cost exceeds marginal revenue it gains by producing less, so profit can be highest only where they are equal; and the equality must occur on the rising part of the marginal…

A firm in perfect competition is a price taker because its output is a negligible part of the market, so it can sell any quantity at the ruling price.

This is the defining condition of the short run, where plant and machinery cannot be changed, so only the proportion between the variable factor and the fixed factor alters.

The reason is arithmetic rather than economic: so long as marginal cost is below average cost, each extra unit pulls the average down, and once marginal cost rises above average cost the average must rise, so the two can only be equal where the average is at its lowest.

Average fixed cost is total fixed cost divided by output; the numerator is unchanged, so a larger output spreads the same fixed cost over more units.

Fixed cost is the payment for factors that cannot be varied in the short run, such as the rent of the factory building, insurance and the salary of permanent staff, and it has to be met even when output is zero, which is why it is also called supplementary or…

A famine is marked by widespread deaths from starvation and from epidemics, which spread through contaminated water, rotting food and bodies weakened by hunger.

Public investment means government spending that creates lasting assets or capacity, while support prices, free power and loan waivers are subsidies or transfers.

The Petroleum and Natural Gas Regulatory Board covers the downstream chain, refining to sale, but not the production of crude oil and natural gas.

In national income accounting the steps run from private income to personal income to personal disposable income. Private income is the factor income of the private sector plus transfers.

Each organisation is paired with the wrong ministry. The National Automotive Board works under the Ministry of Heavy Industries; it supports the automobile sector with testing and certification work and helps run schemes for the industry.

An expansionist policy aims to make money cheaper and more plentiful, so the RBI would not raise the Marginal Standing Facility rate, which makes borrowing dearer.

Connecting villages to the Internet and offering Wi-Fi in schools and public places is part of Digital India; the other two are not its stated aims.

FDI comes in as equity ownership, so India does not have to repay it with interest. Under Indian rules, FDI is investment by a person resident outside India in an unlisted company, or in ten per cent or more of the paid-up equity of a listed company.

PAHAL is the direct benefit transfer scheme for subsidy on cooking gas (LPG). PAHAL stands for Pratyaksh Hanstantrit Labh, meaning direct transferred benefit.

In the Union Budget 2022-23, interest on past borrowing was the single largest item of revenue expenditure. Revenue expenditure is spending that creates no assets, such as salaries, pensions, interest, subsidies and grants.

Keynes made the paradox of thrift a central idea of his economics in the 1930s. The paradox says that what is wise for one household can hurt the whole economy.

If two goods are perfect substitutes, such as two brands of identical salt, the consumer is willing to exchange them at a fixed rate whatever quantity he already holds, so the marginal rate of substitution is constant and a constant slope means a straight line.