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

Which of the following statement is correct.

  1. in case of a Monopolistic firm there is no supply curve

  2. supply curve of a Monopolistic firm is downward sloping

  3. supply curve of a monopolistic firm is upward sloping

  4. supply curve of a monopolistic firm is a straight line
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A monopoly does not have a supply curve because it is a price setter. The quantity supplied depends on the demand curve and the marginal cost curve, not just price.

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

A natural monopoly has declining _________ over large range of output.

  1. long run average cost

  2. short run average cost

  3. long run total cost

  4. short run total cost
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Natural monopoly is a situation which exist due to the high fixed or start up costs to set up a business. It is seen basically where there are unique technology, raw materials.etc. A monopoly based on size and market strength is known as natural monopoly. It also has a long run average cost which is declining over large range of output.

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

For a monopoly firm the MR 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

This is a duplicate of question 473117 testing the same concept. For linear demand, MR lies halfway between AR and Y-axis because MR has twice the slope of demand. Both start at same intercept, but MR hits zero at half the quantity where AR reaches zero.

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

When the demand of a pure monopoly firm is elastic, MR will be _______.

  1. negative

  2. positive

  3. zero

  4. none
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

This is a duplicate of question 473116. When demand is elastic (|Ed|>1), a price decrease increases total revenue, meaning MR is positive. MR becomes negative when demand is inelastic, and equals zero at unit elastic point.

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 is possible
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

For a monopolist, the demand curve (AR) is downward sloping. To sell an additional unit, the firm must lower the price for all units, meaning the marginal revenue from the last unit is less than the price (AR) received for it.

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

A monopoly firms demand curve is __________.

  1. same as its supply curve

  2. same as its average revenue curve

  3. same as its marginal revenue curve

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

The average revenue (AR) represents the price per unit at different quantities, which is exactly the definition of the demand curve. Therefore, for any firm, the demand curve is the same as the AR curve.

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

In the long-run equilibrium of a competitive market, firms operate at:

  1. The intersection of the marginal cost and marginal revenue

  2. Their efficient scale

  3. Zero economic profit

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

In the long run, a competitive firm operates at MC = MR, on the minimum of the LAC and earn zero economic profit, i.e, operate at normal profit levels.