Tag: liquidity preference and profit

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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 > 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.

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.