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

When Marginal revenue is zero?

  1. Total revenue is also zero

  2. Total revenue is the maximum

  3. Total revenue is the minimum

  4. Total revenue starts increasing sharply
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total revenue (TR) is maximized when marginal revenue (MR) equals zero. Beyond this point, selling additional units would cause TR to decline because the price reduction required to sell more outweighs the revenue from the extra unit.

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

Average revenue of a monopolist firm is _________.

  1. always more than the marginal revenue

  2. always less than the marginal revenue

  3. equal to marginal revenue

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

For a monopolist, the demand curve is downward sloping, meaning to sell more units, the firm must lower the price for all units. Consequently, the marginal revenue of the next unit is lower than the average revenue (price) of the units sold.

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

Individual buyer and seller is a price taker in which market structure?

  1. Monopoly

  2. Perfect competition

  3. Discriminating monopoly

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

In a perfectly competitive market, there are many buyers and sellers, and the product is homogeneous. Therefore, no single participant can influence the market price, making them price takers.

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

In imperfect competition, the MR curve will lie ______________.

  1. Below the AR curve

  2. Above the MR curve

  3. Below the AC curve

  4. Above the AC curve
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A firm under imperfect competition such as under monopoly can sell more only by lowering its price. Therefore, the average curve is downward sloping and its corresponding marginal revenue curve lies below it.

Hence, A is the correct option.

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

Under monopoly ________________.

  1. The AR being steeper than the MR curve

  2. The MR being steeper than the AR curve

  3. MR = AR

  4. AC = AR
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In a monopoly, the marginal revenue (MR) curve lies below the average revenue (AR) curve and is twice as steep. This is because the firm must lower the price on all previous units to sell an additional unit.

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

The average revenue curve of a firm under pure monopoly will be a _______________.

  1. Straight line

  2. Vertical line

  3. Downwards slope

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

A monopolist faces the entire market demand curve, which is downward sloping. Since the average revenue curve is identical to the demand curve, it must also be downward sloping.

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

Government can eliminate all monopoly profits by setting a price equal to ______________.

  1. Average variable cost

  2. Average cost

  3. Average fixed cost

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

 The government requires the monopoly to set a price equal to average cost. That is, it requires the firm to choose an (output, price) pair for which AC is equal to AR. This regulation eliminates profit, but does not necessarily lead to an efficient outcome.

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

In monopolistic competition, the average revenue curve of the firm is ______________.

  1. less elastic

  2. more elastic

  3. unit elastic

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Average curve will be considerably more elastic  because the monopolistically competitive firm has less control over the price that it can charge for its output.