Why is micro-controller called as micro-controller?

Answer 1

It is called a microprocessor because it is the single microchip integrated circuit processor of a microcomputer. The term minicomputer was already taken and referred to small computers whose processor was built of many different microchip integrated circuits. There was never anything called a "miniprocessor" in these computers, just as there was never anything called a "mainframe processor" in the big computers.

Note: Some early microprocessors were not single microchips, but were instead a family of related microchips that could be interconnected in a variety of different ways (e.g. AMD 2900 family). This served two functions:

1. it avoided the limits of the number of transistors that could be put on a single microchip with the technology available then
2. providing greater design flexibility (e.g. the same microprocessor family could be used to build microcomputers having very different word lengths depending on the requirements: 16 bit, 32 bit, 48 bit, 64 bit, etc.)

You do not see this anymore, all microprocessors now are single microchip integrated circuits.