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

Market demand curve shows the ______.

  1. quantities that consumers as a whole are willing to purchase at different prices.

  2. demand for a commodity in an area

  3. demand of the market in different conditions

  4. both A and B
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The market demand curve is the addition of all the individual demand curves in the market. It shows the quantity demanded by the individuals at a given price point. Hence, the market demand curve shows the quantities that consumers as a whole are willing to purchase at different prices.

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

The actual return of an investor is reduced sometimes as the prices of the commodities go up all of a sudden. In financial sector this type of phenomenon is known as _____________.

  1. probability risk

  2. market risk

  3. inflation risk

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

Market risk refers to the possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets, such as sudden price changes.

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

When the demand curve of a pure monopoly firm is elastic, marginal revenue will be _________.

  1. negative

  2. positive

  3. zero

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

When demand is elastic (e > 1), an increase in quantity (via a price decrease) leads to an increase in total revenue, meaning marginal revenue must be positive.

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

For a monopoly firm the marginal revenue curve _________.

  1. overlaps AR curve

  2. is above the AR curve

  3. lies half way between AR curve and the Y axis

  4. is parallel to X axis
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

For a linear demand curve, the marginal revenue curve is twice as steep as the demand (AR) curve, meaning it bisects the distance between the Y-axis and the AR curve at any given price level.

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

The marginal revenue curve of first degree price discriminating monopoly is __________.

  1. U shaped

  2. straight line

  3. same as its supply curve

  4. equal to its demand curve
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In first-degree price discrimination, the monopolist charges each consumer their maximum willingness to pay. Thus, the marginal revenue of each unit is equal to the price of that unit, making the MR curve identical to the demand curve.

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

Marginal revenue of a pure monopoly is less than its price because _________.

  1. to sell more it reduces prices

  2. fear of government intervention

  3. fear of losing customer base

  4. its commitment toward social justice
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A monopolist faces a downward-sloping demand curve. To sell an additional unit, the firm must lower the price not just for that unit, but for all previous units, causing MR to be less than the price.

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

Which of the following faces a downward sloping demand curve?

  1. Firm in a competitive market

  2. Firm in a monopoly market

  3. Both (A) and (B)

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

A firm in a competitive market faces a horizontal demand curve (price taker). A monopoly firm faces the entire market demand curve, which is downward sloping.