Tag: theories of distribution

Quizzes (5) Questions (164)

Questions Related to theories of distribution

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Which of the following is NOT the feature of monopoly form of market?

  1. Not elastic in nature

  2. Legal barriers

  3. Size of the market is too small

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A monopoly is characterized by a single seller and high barriers to entry. 'Not elastic in nature' is not a standard feature, as the demand curve for a monopolist can be elastic or inelastic depending on the price point.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

In a free market economy, the optimal quality of goods and service is determined by ____________.

  1. customers

  2. workers

  3. firms

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

Customer is one who purchase goods and services from the seller. Customer satisfaction is the main aim of the seller to earn goodwill in the market. Free market economy is one where there are no government or less government interventions. Hence, in a free market economy, the optimal quality of goods and service is determined by customers.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

When elasticity of demand is equal to one, MR will be equal to _______.

  1. one

  2. zero

  3. infinity

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

When the price elasticity of demand is 1 (unitary elastic), the total revenue is maximized, which means the marginal revenue (the change in revenue from selling one more unit) is zero.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Marginal Revenue will be negative if the demand is _________.

  1. relatively elastic

  2. unitary elastic

  3. relatively inelastic

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

Marginal revenue is negative when the demand is relatively inelastic (elasticity < 1), because to sell more units, the price must be lowered so significantly that total revenue decreases.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Marginal revenue will be positive if elasticity of demand is _________.

  1. less than one

  2. more than one

  3. equal to one

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

Marginal revenue is positive when demand is relatively elastic (elasticity > 1), as lowering the price leads to a proportionately larger increase in quantity sold, increasing total revenue.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

If a demand curve exhibits unit elasticity for all prices the MR curve ___________.

  1. is identical with it

  2. lies below the demand curve

  3. is parallel to the x-axis

  4. is identical with the y-axis
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If the demand curve has unit elasticity at all points (a rectangular hyperbola), the total revenue is constant. Therefore, the marginal revenue is zero, meaning the MR curve lies on the x-axis (parallel to the x-axis).

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Imperfect monopoly is a single firm industry where ___________________.

  1. The cross elasticity in the market is zero

  2. The cross elasticity of demand between the product of the firm and that of other commodities in the market is small, though it is above zero

  3. The price elasticity to the market is zero

  4. The income elasticity to the market is zero
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In economic theory, imperfect competition is a type of market structure showing some but not all features of competitive markets. Forms of imperfect competition include: Monopolistic competition: A situation in which many firms with slightly different products compete. The cross elasticity of demand between the product of the firm and that of other commodities in the market is small, though it is above zero

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Price discrimination is not profitable when _________________.

  1. The demand curves are iso-elastic

  2. The demand curves are elastic

  3. The supply curves are iso-elastic

  4. The supply curves are elastic
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Price discrimination is not profitable if the demand curves of different market segments have the same elasticity (iso-elastic), as there is no basis to charge different prices to maximize revenue.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Relationship between revenue and elasticity of demand can be given by __________.

  1. $ MR = AR \left ( 1-\frac{e}{p} \right )$

  2. $ MR = AR \left ( 1-\frac{1}{e} \right )$

  3. $ AR = MR \left ( 1-\frac{1}{e} \right )$

  4. $ AR &gt; MR \left ( 1-\frac{1}{e} \right )$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The relationship between marginal revenue (MR), average revenue (AR), and price elasticity of demand (e) is defined by the formula MR = AR(1 - 1/e). This formula shows how MR relates to the price charged by the firm.