Unit 6: Theories of Distribution — Online MCQ Test
ECONOMICS · CLASS 11 INTERMEDIATE 1 YEAR · Telangana State Board
Practice Unit 6: Theories of Distribution with a free chapter-wise online MCQ test.
This chapter covers: This chapter covers factor pricing theories Ricardian theory of rent marginal productivity theory Keynesian liquidity preference theory of interest and profit theories..
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Unit 6: Theories of Distribution — Important Questions & Answers
In economics, what is 'rent' according to Ricardo's theory of rent?
- A. Payment for the use of land only
- B. Payment for labour services
- C. Payment for capital investment
- D. Payment for entrepreneurial risk
Answer: A. Payment for the use of land only
Ricardo defined rent as the surplus payment made for the use of land. It is a return specifically associated with land as a factor of production.
Ricardo defined rent as the surplus payment made for the use of land. It is a return specifically associated with land as a factor of production.
According to the marginal productivity theory, the price of a factor of production is determined by its:
- A. Average product
- B. Marginal product
- C. Total product
- D. Physical size
Answer: B. Marginal product
The marginal productivity theory states that a factor is paid according to its marginal contribution to output. Hence, marginal product is the key determinant.
The marginal productivity theory states that a factor is paid according to its marginal contribution to output. Hence, marginal product is the key determinant.
In Ricardian theory, rent arises because land differs in its:
- A. Colour and size
- B. Fertility and location
- C. Ownership and price
- D. Tax rate and shape
Answer: B. Fertility and location
Ricardo explained rent as arising from differences in fertility and location of land. More fertile or better-located land earns rent over inferior land.
Ricardo explained rent as arising from differences in fertility and location of land. More fertile or better-located land earns rent over inferior land.
Which statement correctly distinguishes rent from profit?
- A. Rent is the reward for land, while profit is the reward for entrepreneurship
- B. Rent is the reward for capital, while profit is the reward for labour
- C. Rent is paid for money borrowed, while profit is paid for land
- D. Rent and profit are identical concepts
Answer: A. Rent is the reward for land, while profit is the reward for entrepreneurship
Rent is a return on land, whereas profit is the reward for entrepreneurship. They are different factor payments in distribution theory.
Rent is a return on land, whereas profit is the reward for entrepreneurship. They are different factor payments in distribution theory.
Which of the following statements about profit is most appropriate in the context of distribution theories?
- A. Profit is always a fixed contractual payment like rent
- B. Profit is the residual return after paying contractual factor payments and is linked with risk-bearing
- C. Profit is determined only by fertility of land
- D. Profit is the same as interest under all circumstances
Answer: B. Profit is the residual return after paying contractual factor payments and is linked with risk-bearing
Profit is generally treated as the residual return to entrepreneurship after other factor payments are made. It is closely associated with uncertainty and risk-bearing.
Profit is generally treated as the residual return to entrepreneurship after other factor payments are made. It is closely associated with uncertainty and risk-bearing.