Price Determination In Market: Quiz!

The equilibrium market price will be Rs.4 because at this price, the quantity demanded and quantity supplied are equal. This can be seen from the table where at a price of Rs.4, the demand is 700 tonnes and the supply is also 700 tonnes. At any other price, there will be either excess demand or excess supply, leading to a shift in the market towards the equilibrium price of Rs.4.

The term market refers to a place where buyers and sellers engage in the process of bargaining and negotiating the price of a product or service. It is a platform where both parties come together to exchange goods or services in a mutually agreed-upon transaction. In a market, buyers have the opportunity to negotiate and bargain with sellers to reach a price that is acceptable to both parties. This process of bargaining is a fundamental aspect of a market, making the option "Place where buyer and seller bargain a product or service for a price" the correct answer.

The ultimate goal of a firm is to maximize profits, regardless of its size or type of business organization. This assumption is based on the profit maximization principle in economic theory, which suggests that firms aim to maximize their profits by making rational decisions. Profit maximization is considered the primary objective of firms as it ensures their long-term survival and growth. This assumption implies that firms prioritize profit generation over other goals such as market share, social welfare, or employee satisfaction.

The total revenue is calculated by multiplying the price of a product or service by the quantity sold. This is because revenue represents the total amount of money generated from the sales of a product, which is determined by both the price at which it is sold and the number of units sold. Therefore, the correct answer is Price x Quantity.

In perfect competition, firms are price takers and not price makers. This means that they have no control over the price of their products and must accept the market price as given. In a perfectly competitive market, there are many buyers and sellers, and no individual firm has enough market power to influence the price. Therefore, firms in perfect competition must accept the prevailing market price and adjust their quantity of output accordingly.

A monopolist is a price maker because they have the power to set the price of their product or service without any competition. Unlike in a competitive market where prices are determined by supply and demand, a monopolist can set higher prices and restrict output to maximize their profits. This ability to control the price makes them a "maker" of the price rather than a "taker" who must accept the prevailing market price.

Perishable goods like butter, eggs, milk, and vegetables have a limited shelf life and need to be consumed quickly. Therefore, they are typically sold in local markets where they can be easily transported and sold to nearby consumers. Regional and national markets may not be suitable for these types of products as they require faster turnover and may not be able to withstand long-distance transportation. Hence, the correct answer is "Local market."

The absence of transport cost is not an essential condition of pure competition because in a perfectly competitive market, buyers and sellers have the freedom to enter and exit the market freely, there is a large number of buyers and sellers, and the products being sold are homogeneous. The absence of transport cost does not directly affect the competitiveness of the market or the ability of buyers and sellers to freely participate in it.

Average revenue refers to the revenue earned per unit of output. It is calculated by dividing the total revenue by the quantity of output produced. This measure helps businesses assess their revenue generation efficiency and pricing strategies. By understanding the average revenue per unit of output, companies can make informed decisions regarding production levels and pricing to maximize their profitability.

In a competitive market, firms do not generate small but positive supernormal profits in the long run. In a perfectly competitive market, firms can only earn normal profits in the long run, which means they earn enough to cover their costs but not more than that. Supernormal profits refer to profits that are above and beyond normal profits, and in a competitive market, such profits are not sustainable in the long run due to the presence of many buyers and sellers and the ability of firms to freely enter or exit the market.

A negatively-sloped demand curve is a characteristic of a price taker. This means that as the price decreases, the quantity demanded increases. Price takers are unable to influence the market price and must accept the prevailing price in the market. As a result, they face a downward-sloping demand curve. Therefore, a negatively-sloped demand curve is not a characteristic that is not associated with a price taker.

A monopoly is a form of market structure where there is only one firm that dominates the entire market and has complete control over the price of its product. This means that the firm can set the price at any level it desires without facing competition from other firms. As there are no close substitutes available in the market, consumers have no choice but to accept the price set by the monopolistic firm. Therefore, in a monopoly, the degree of control over the price of its product by a firm is very large.

In perfect competition, a firm has no control over the price of its product because there are many buyers and sellers in the market. Each firm is a price taker, meaning they must accept the market price set by the forces of supply and demand. In this market structure, no individual firm has the ability to influence or manipulate the price of the product. Therefore, the correct answer is Perfect competition.

In perfect competition in the long run, there will be no supernormal profits. This is because in perfect competition, there are no barriers to entry or exit for firms, meaning that new firms can easily enter the market if they see that existing firms are making supernormal profits. As more firms enter the market, competition increases, driving down prices and reducing profits. Eventually, in the long run, firms will only earn normal profits, which are just enough to cover their opportunity costs and keep them in the industry.

The correct answer is TR / Q. This is because AR (average revenue) is equal to TR (total revenue) divided by Q (quantity). Average revenue represents the revenue generated per unit of output.

In a monopolistically competitive market, there are many sellers and differentiated products, meaning that each seller offers a slightly different product from their competitors. Additionally, there is free entry and exit, meaning that new firms can easily enter the market and existing firms can exit if they choose to. However, abnormal profits in the long run are not a characteristic of a monopolistically competitive market. In the long run, firms in a monopolistically competitive market will experience normal profits, as new firms enter the market and competition increases, reducing the ability to earn above-average profits.

A monopoly is a market structure in which there is a single firm that dominates the entire market, giving it significant control over the price and quantity of the product. The firm is not a price taker, as it has the power to set prices based on its own discretion. A price taker refers to a firm in a perfectly competitive market, where it has no control over the price and must accept the market price as given. Therefore, the statement "The firm is a price taker" contradicts the characteristics of a monopoly.

The stock exchange market is an example of a regulated market because it operates under a set of rules and regulations imposed by regulatory authorities. These regulations are designed to protect investors, ensure fair trading practices, and maintain market stability. In a regulated market, there are strict guidelines for listing securities, disclosure of information, and trading activities. The stock exchange market is closely monitored by regulatory bodies to prevent fraud, manipulation, and insider trading, making it a regulated market rather than an unregulated or spot market.

If the firm is producing a level of output where marginal revenue (MR) is greater than marginal cost (MC), it means that the additional revenue generated from selling one more unit of output is higher than the additional cost incurred in producing that unit. This indicates that the firm can increase its profits by producing and selling more units of output. Therefore, the firm should increase its output to maximize its profits.

The demand curve of a monopoly firm will be downward sloping because as the firm is the sole provider of a particular product or service, it has the power to control the price. As the price increases, the quantity demanded by consumers decreases. Therefore, the demand curve for a monopoly firm slopes downward, indicating that as the price decreases, the quantity demanded increases.

Monopolistic competition differs from perfect competition primarily because firms in monopolistic competition have the ability to differentiate their products. This means that each firm can offer a slightly different product in terms of quality, features, branding, or other factors. In perfect competition, on the other hand, all firms offer identical products. This differentiation in monopolistic competition allows firms to have some control over the price and demand for their product, leading to a certain degree of market power.

In a perfectly competitive market, firms are price takers, meaning they have no control over the price and must accept the market price. Price discrimination, on the other hand, involves charging different prices to different customers based on their willingness to pay. This practice is not beneficial for a firm in a perfectly competitive market as they have no control over the price and cannot discriminate prices. Therefore, the statement that it is always beneficial for a firm in a perfectly competitive market to discriminate prices is incorrect.

The market for the ultimate consumers is known as the retail market. This is because the retail market is where goods and services are sold directly to individual consumers for their personal use. It is characterized by small-scale transactions and a wide variety of products available for purchase. Unlike wholesale markets, which sell goods in large quantities to retailers, the retail market focuses on catering to the needs and preferences of individual consumers.

Price discrimination is a strategy used by businesses to charge different prices to different customers for the same product or service. It is based on various factors such as time, size of the purchase, and income. By considering these factors, businesses can maximize their profits by charging higher prices to customers who are willing to pay more and lower prices to customers who are more price-sensitive. Therefore, price discrimination can be related to any of the above factors, allowing businesses to tailor their pricing strategies to different customer segments.

The correct answer is that the competitive firm maximizes profit when marginal cost equals marginal revenue. This is because the firm should keep producing as long as the additional revenue from selling one more unit (marginal revenue) is greater than or equal to the additional cost of producing that unit (marginal cost). If marginal cost is less than marginal revenue, the firm can increase profit by producing more. However, if marginal cost is greater than marginal revenue, producing more would lead to a decrease in profit. Therefore, at the point where marginal cost equals marginal revenue, the firm is maximizing its profit.

Under monopoly, the degree of control over price is very considerable. This is because a monopoly is the sole provider of a product or service in the market, allowing them to have complete control over the price they set. Since there are no competitors, the monopoly can set prices at a level that maximizes their profits without fear of losing customers to lower-priced alternatives. As a result, they have significant control over the price and can manipulate it to their advantage.

An oligopolistic industry is characterized by a small number of firms, which implies that there is limited competition. Price leadership is also commonly observed in oligopolies, where one dominant firm sets the price and others follow suit. Additionally, non-price competition, such as advertising and product differentiation, is given significant importance in oligopolistic industries. However, a horizontal demand curve is not typical of oligopolies. In an oligopoly, firms have some control over prices and can influence demand, resulting in a downward-sloping demand curve.

The marginal revenue resulting from an increase in output from 15 units to 16 units is Rs. 12. This can be determined by calculating the change in total revenue when the quantity increases by one unit. In this case, the price decreases from Rs. 20 to Rs. 18, resulting in a decrease in total revenue of Rs. 2. Therefore, the marginal revenue is equal to the decrease in total revenue, which is Rs. 2.

Under perfect competition, a firm faces a perfectly elastic demand curve, which means that the firm can sell any quantity of output at the prevailing market price. This is because there are numerous buyers and sellers in the market, and the firm's individual output is negligible compared to the total market output. As a result, the demand curve faced by a firm under perfect competition is horizontal, indicating that the firm has no control over the price and must accept the market price for its output.

The first-order condition for the profit of a firm to be maximum is MC = MR. This condition states that in order to maximize profits, a firm should produce an additional unit of output as long as the marginal cost (MC) of producing that unit is less than or equal to the marginal revenue (MR) generated from selling it. If the marginal cost exceeds the marginal revenue, producing that additional unit would result in a decrease in profit. Therefore, MC = MR ensures that the firm is operating at the level of output where profit is maximized.

Perfect competition is a market structure characterized by a large number of firms, perfect mobility of factors, and freedom of entry and exit into and out of the market. In perfect competition, firms are price takers and have no control over the market price. However, informative advertising to ensure that consumers have good information is not a condition of perfect competition. In perfect competition, firms compete solely based on price, and there is no need for informative advertising as consumers have perfect information about the products and prices available in the market.

In a perfectly competitive market, firms are price takers and have no control over the price of their products. This means that they face a horizontal or perfectly elastic demand curve, as they can sell as much as they want at the market price. Therefore, the statement that firms face downward-sloping demand curves is not a characteristic of a perfectly competitive market.

Monopolistic competition is characterized by product differentiation, which means that each firm offers a slightly different product from its competitors. This allows firms to have some control over the price and to differentiate their products through branding, packaging, or other features. A relatively large number of sellers is also a characteristic of monopolistic competition, as there are many firms competing in the market. Ease of entry into the industry is another characteristic, as new firms can easily enter the market and compete with existing firms. However, a homogenous product is not a characteristic of monopolistic competition, as it implies that all firms offer the same product, which is not the case in this market structure.

In a perfectly competitive market, price-taking firms are unable to affect the market price through their output decisions. This means that individual firms have no control over the price at which they can sell their products. They must accept the market price as given and adjust their output accordingly. This is because there are numerous buyers and sellers in the market, and no individual firm has enough market power to influence the price. Therefore, the correct answer is that the individual firm is unable to affect market price through its output decisions.

Price discrimination refers to the practice of charging different prices to different groups of customers for the same product or service. In order for price discrimination to be profitable, the elasticity of demand in different markets must be different. Elasticity of demand measures how responsive the quantity demanded is to a change in price. If the elasticity of demand is different in different markets, it means that customers in some markets are more sensitive to price changes than others. This allows the seller to charge higher prices to the less price-sensitive markets and lower prices to the more price-sensitive markets, maximizing their overall profit.

The correct answer is "The change in P x Q due to a one unit change in output." This is because marginal revenue is the additional revenue a firm earns from selling one more unit of output. It is calculated by multiplying the change in price (P) by the change in quantity (Q) resulting from a one unit change in output. This formula captures the concept that marginal revenue is dependent on both price and quantity.

In both monopolistic competition and perfect competition, firms will only earn a normal profit. This means that they will make enough profit to cover their opportunity cost and keep them in the industry, but they will not make any excess profit. This is because in both market structures, there is free entry and exit, meaning that if firms were making above-normal profit, new firms would enter the market, increasing competition and driving down prices until only a normal profit is earned. Therefore, in the long run, both monopolistic competition and perfect competition result in firms earning a normal profit.

A monopolist is able to maximize his profits when his marginal cost is equal to marginal revenue. This is because the monopolist determines the price and quantity of goods in the market, and in order to maximize profits, they need to produce at a level where the additional cost of producing one more unit (marginal cost) is equal to the additional revenue earned from selling that unit (marginal revenue). This ensures that the monopolist is not producing at a level where the cost exceeds the revenue, leading to a decrease in profits.

AR stands for Average Revenue. It is a term used in economics to represent the revenue generated per unit of output sold by a firm. It is calculated by dividing the total revenue by the quantity sold. Price, on the other hand, refers to the amount of money charged by a firm for a product or service. While price and average revenue are related, they are not the same thing. Therefore, the correct answer is "Price" as it is not the same as income or revenue.

Marginal revenue refers to the change in total revenue that occurs when an additional unit of a commodity is sold. It specifically focuses on the revenue generated from the sale of each additional unit. This means that when a company sells one more unit of a product, the increase in total revenue resulting from that sale is considered as the marginal revenue. Therefore, the correct answer is "Sales of an additional unit of a commodity."

The statement "An industry consists of many firms" is correct because an industry refers to a group of firms that produce similar goods or services. In a competitive market, there are multiple firms operating within the industry, each with their own market share and level of competition. This is in contrast to a monopoly, where there is only one firm dominating the market.

Oligopolistic industries are characterized by a few dominant firms and substantial barriers to entry. This means that there are only a small number of firms that dominate the industry, and it is difficult for new firms to enter and compete. The dominant firms have a significant market share and often have the power to control prices and output. The substantial barriers to entry, such as high capital requirements or government regulations, make it challenging for new firms to enter the market and challenge the dominance of existing firms. This leads to limited competition and the potential for collusion among the dominant firms.

If the market price is less than average total cost but greater than average variable cost, the firm is still covering its variable costs and some portion of its fixed costs. By continuing to operate in the short run, the firm can minimize its losses by at least covering its variable costs. Shutting down would result in incurring the entire fixed costs without any revenue, leading to even greater losses. Raising the price may lead to further loss of customers and revenue. Moving resources to another industry is not mentioned as a viable option in the given scenario. Therefore, the correct statement is that the firm should continue to operate in the short run to minimize its losses.

In a perfect competition, commodities offered for sale are actually homogeneous, meaning they are identical or very similar to each other. This is because in a perfectly competitive market, there are many sellers offering the same product, and buyers have no preference for one seller over another. Therefore, sellers have no incentive to differentiate their products, resulting in homogeneous commodities.

The correct answer is "Demand Curve." The demand curve represents the relationship between the price of a product and the quantity of that product that consumers are willing to purchase. It shows the average revenue a firm receives from selling a unit of output at different price levels. The demand curve is downward sloping, indicating that as the price increases, the quantity demanded decreases. Therefore, the other name given to the average revenue curve is the demand curve.

Monopolistic competition refers to a market structure where there are many firms selling products that are similar but not identical. In this type of market, each firm has some degree of control over the price of its product, but there is also some competition from other firms. This competition is based on product differentiation, where firms try to make their products stand out from others through branding, advertising, or other means. As a result, there is a range of prices and product variations in the market, giving consumers some choice while still allowing firms to have some market power.

Alfred Marshall is credited with developing the concept of time element in economics. He introduced the concept of time into economic analysis, recognizing that time plays a crucial role in decision-making and economic outcomes. Marshall's work on the time element helped to advance the understanding of how factors such as interest rates, investment decisions, and the timing of production affect economic behavior and outcomes.

The correct answer is that marginal revenue is equal to price. In a price-taking firm, the firm is a price taker and cannot influence the market price. Therefore, the firm's marginal revenue is equal to the price of the good or service it sells. This is because each additional unit sold by the firm will generate the same amount of revenue as the market price.

The shutdown point for a firm occurs when the average variable cost equals the price at the profit-maximizing level of output. At this point, the firm is just covering its variable costs and is not able to cover its fixed costs. Therefore, it would be better for the firm to shut down and minimize its losses rather than continue producing. This is because producing at this level would result in a negative contribution towards fixed costs, leading to even greater losses.

Agricultural goods markets are typically characterized by a large number of buyers and sellers, homogeneous products, ease of entry and exit, and perfect information. These characteristics closely align with those of perfect competition, where no single buyer or seller has control over the market price and there is free competition. In a perfect competition market, agricultural goods are traded at market-determined prices and there are no barriers to entry or exit for farmers or buyers. Therefore, the correct answer is perfect competition.