Tag: equilibrium of a firm

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Questions Related to equilibrium of a firm

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

The market for hand tools (Such as hammers and screwdrivers) is dominated by Draper, Stanley, and Craftsman. This market is best described as

  1. Monopolistically competitive

  2. a monopoly

  3. an oligopoly

  4. perfectly competitive
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

An oligopoly is a market structure dominated by a small number of large firms. Since the hand tool market is dominated by only three major companies, it fits this definition.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Consumer stops purchasing the additional units of the commodity when ______________________.

  1. marginal utility starts declining

  2. marginal utility become zero

  3. marginal utility is equal to marginal utility of money

  4. total utility is increasing
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the law of diminishing marginal utility, a rational consumer will stop consuming additional units when the marginal utility of the last unit consumed becomes zero, as consuming more would then decrease total utility.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Marginal utility of a commodity dependson its quantity and is_______.

  1. inversely proportional to its quantity

  2. not proportional to its quantity

  3. independent of its quantity

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The law of diminishing marginal utility states that as more units of a commodity are consumed, the additional satisfaction (marginal utility) derived from each subsequent unit decreases, meaning it is inversely related to the quantity consumed.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

A tiny unit is one having investment upto _____________.

  1. 5 lakh

  2. 20 lakh

  3. 50 lakh

  4. 1 crore
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Based on historical industrial policy definitions in India, a tiny unit was classified as having an investment in plant and machinery up to 5 lakh rupees.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

The point of intersection between aggregate demand curve and aggregate supply curve is called _________________.

  1. aggregate demand

  2. market demand

  3. effective demand

  4. demand
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Aggregate supply refers to the desired level of output in the economy during an accounting year. It is through this output only that the producer sector generates income. 

Aggregate Demand refers to the desired level of expenditure in the economy during an accounting year. It is what people wish to spend on the purchase of goods and services during an accounting year.

Therefore, the point of  intersection between aggregate demand curve and aggregate supply curve is called effective demand as at this point all the output produced in the economy is used by the consumers of the economy owing to full employment. 

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Marginal Productivity Theory is based on the assumption of ___________________.

  1. perfect competition

  2. monopoly

  3. oligopoly

  4. monopsony
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Marginal Productivity Theory of distribution assumes perfect competition in both the product and factor markets to determine the prices of factors of production.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Marginal productivity theory is the _______________ theory of distribution.

  1. primary

  2. general

  3. central

  4. secondary
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Marginal Productivity Theory is considered a general theory of distribution because it attempts to explain the determination of all factor prices (wages, rent, interest, profit) based on their marginal productivity.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

When average cost production (AC) falls, marginal cost of production must be _________.

  1. rising

  2. falling

  3. greater than the average cost

  4. less than the average cost
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The relationship between Average Cost (AC) and Marginal Cost (MC) dictates that when AC is falling, MC must be below AC. When AC is rising, MC must be above AC.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Effective demand depends on ______.

  1. capital-output ratio

  2. output-capital ratio

  3. total expenditure

  4. supply price
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Effective demand depends on supply price. Effective demand refers to that point where aggrgate demand is equal to aggregate supply. Therefore, supply price and demand price are independent.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

When demand curve shifts to the right, the ________. 

  1. equilibrium quantity and price increase

  2. equilibrium quantity and price decrease

  3. equilibrium quantity increases and price decreases

  4. equilibrium quantity decreases and price increases
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A rightward shift in the demand curve indicates an increase in demand. With a stable supply curve, this leads to both a higher equilibrium price and a higher equilibrium quantity.