Price Determination In Market: Quiz!

20 Questions | Total Attempts: 450

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Price Determination In Market: Quiz!

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Questions and Answers
  • 1. 
    In the table below what will be equilibrium market price?   Price Demand(tonnes per annum) Supply(tonnes per annum) 1 1000 400 2 900 500 3 800 600 4 700 700 5 600 800 6 500 900 7 400 1000 8 300 1100  
    • A. 

      Rs.2

    • B. 

      Rs.3

    • C. 

      Rs.4

    • D. 

      Rs.5

  • 2. 
    Assume that when the price is RS.20, the quantity demanded is 9 units, and when the price is Rs.19, the quantity demanded is 10 units. Based on this information, what is the marginal revenue resulting from an increase in output from 9 units to 10 units?
    • A. 

      Rs.20

    • B. 

      Rs.19

    • C. 

      Rs.10

    • D. 

      Rs.1

  • 3. 
    Assume that when the price is Rs. 20, the quantity demanded is 15 units, and when the price is Rs. 18, the quantity demanded is 16 units. Based on this information, what is the marginal revenue resulting from an increase in output from 15 units to 16 units?
    • A. 

      Rs.18

    • B. 

      Rs.16

    • C. 

      Rs.12

    • D. 

      Rs.28

  • 4. 
    Suppose a firm is producing a level of output such that MR > MC. What should be a firm do to maximize its profits?
    • A. 

      The firm should do nothing.

    • B. 

      The firm should hire less labour.

    • C. 

      The firm should increase price.

    • D. 

      The firm should increase output.

  • 5. 
    Marginal Revenue is equal to:
    • A. 

      The change in price divided by the change in output.

    • B. 

      The change in quantity divided by the change in price.

    • C. 

      The change in P x Q due to a one unit change in output.

    • D. 

      Price, but only if the firm is a price searcher.

  • 6. 
    Suppose that a sole proprietorship is earning total revenues of  Rs.1,00,000 and is incurring explicit costs of Rs. 75,000. If the owner could work for another company for Rs. 30,000 a year, we would conclude that:
    • A. 

      The firm is incurring an economic loss.

    • B. 

      Implicit costs are Rs. 25,000.

    • C. 

      The total economic costs are Rs.1,00,000.

    • D. 

      The individual is earning an economic profit of Rs.25,000.

  • 7. 
    Which of the following is not an essential condition of pure competition?
    • A. 

      Large number of buyers and sellers

    • B. 

      Homogeneous product

    • C. 

      Freedom of entry

    • D. 

      Absence of transport cost

  • 8. 
    What is the shape of the demand curve faced by a firm under perfect competition?
    • A. 

      Horizontal

    • B. 

      Vertical

    • C. 

      Positively sloped

    • D. 

      Negatively sloped

  • 9. 
    Which is the first-order condition for the profit of a firm to be maximum?
    • A. 

      AC = MR

    • B. 

      MC = MR

    • C. 

      MR = AR

    • D. 

      AC = AR

  • 10. 
    Which of the following is not a characteristic of a price taker?
    • A. 

      TR = P x Q

    • B. 

      AR = Price

    • C. 

      Negatively - sloped demand curve

    • D. 

      Marginal Revenue = Price

  • 11. 
    Which of the following statements is false?
    • A. 

      Economic costs include the opportunity costs of the resources owned by the firm.

    • B. 

      Accounting costs include only explicit costs.

    • C. 

      Economic profit will always be less than accounting profit if resources owned and used by the firm have any opportunity costs.

    • D. 

      Accounting profit is equal to total revenue less implicit costs.

  • 12. 
    With a given supply curve, a decrease in demand causes
    • A. 

      An overall decrease in price but an increase in equilibrium quantity.

    • B. 

      An overall increase in price but a decrease in equilibrium quantity.

    • C. 

      An overall decrease in price and a decrease in equilibrium quantity.

    • D. 

      No change in overall price but a reduction in equilibrium quantity.

  • 13. 
    It is assumed in economic theory that
    • A. 

      Decision making within the firm is usually undertaken by managers, but never by the owners.

    • B. 

      The ultimate goal of the firm is to maximise profits, regardless of firm size or type of business organisation.

    • C. 

      As the firm's size increases, so do its goals.

    • D. 

      The basic decision making unit of any firm is its owners.

  • 14. 
    Assume that consumers' incomes and the number of sellers in the market for good A both decrease. Based upon this information we can conclude, with certainty, that equilibrium :  
    • A. 

      Price will increase.

    • B. 

      Price will decrease.

    • C. 

      Quantity will increase.

    • D. 

      Quantity will decrease.

  • 15. 
    Suppose that the supply of cameras increases due to an increase in foreign imports. Which of the following will most likely occur?
    • A. 

      The equilibrium price of cameras will increase.

    • B. 

      The equilibrium quantity of cameras exchanged will decrease.

    • C. 

      The equilibrium price of camera film will decrease.

    • D. 

      The equilibrium quantity of camera film exchanged will increase.

  • 16. 
    Assume that in the market for good Z there is a simultaneous increase in demand and the quantity supplied. The result will be :      
    • A. 

      An increase in equilibrium price and quantity.

    • B. 

      A decrease in equilibrium price and quantity.

    • C. 

      An increase in equilibrium quantity and uncertain effect on equilibrium price.

    • D. 

      A decrease in equilibrium price and increase in equilibrium quantity.

  • 17. 
    Suppose the technology for producing personal computers improves and, at the same time, individuals discover new uses for personal computers so that there is greater utilisation of personal computers. Which of the following will happen to equilibrium price and equilibrium quantity?
    • A. 

      Price will increase; quantity cannot be determined.

    • B. 

      Price will decrease; quantity cannot be determined.

    • C. 

      Quantity will increase; price cannot be determined.

    • D. 

      Quantity will decrease; price cannot be determined.

  • 18. 
    Which of the following is not a condition of perfect competition?
    • A. 

      A large number of firms.

    • B. 

      Perfect mobility of factors.

    • C. 

      Informative advertising to ensure that consumers have good information.

    • D. 

      Freedom of entry and exit into and out of the market.

  • 19. 
    Which of the following is not a characteristic of a perfectly competitive market? 
    • A. 

      Large number of firms in the industry.

    • B. 

      Outputs of the firms are perfect substitutes for one another.

    • C. 

      Firms face downward-sloping demand curves.

    • D. 

      Resources are very mobile.

  • 20. 
    Which of the following is not a characteristic of monopolistic competition?
    • A. 

      Ease of entry into the industry.

    • B. 

      Product differentiation.

    • C. 

      A relatively large number of sellers.

    • D. 

      A homogenous product.