Tag: liquidity preference and profit

Questions Related to liquidity preference and profit

When demand curve shifts to the right, What happens to the new equilibrium?

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. Higher than original

  2. Lower than original

  3. Same as original

  4. None of the above

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Correct Option: A

When the price of petrol goes up, demand for cars will _____ . 

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. rise

  2. fall

  3. not changes

  4. remain unchanged

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Correct Option: B

Indirect demand is also known as ______ demand.

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. derived

  2. direct

  3. composite

  4. joint

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Correct Option: A

In the case of unitary elastic demand, the total outlay of the consumer before the price change and after the price change will ______ . 

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. become more

  2. become less

  3. remain the same

  4. fluctuate

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Correct Option: C
Explanation:

In the case of unitary elastic demand, the total outlay of the consumer before the price change and after the price change will remain the same. This is a hypothetical case as there is no real life examples for the same. 

The life saving medicines have inelastic demand. 

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. True

  2. False

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Correct Option: A
Explanation:

True. Life saving medicines have inelastic demand. By inelastic we mean when the price changes that consumer buying habit remains the same. The consumer will not reduce the consumption of a life saving drug is the price increase and vice versa. 

Government expenditure increases aggregate demand.

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. True

  2. False

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Correct Option: A
Explanation:

True.  Government expenditure increases Aggregate demand. Its one of the components to determine demand. Aggregate demand takes into account all the expenditure incurred in the country during the year. Government spending can be in the form of welfare, pension etc which increases the purchasing power of the people thereby increasing demand. 

If the demand is less than unitary elastic , the total outlay of the consumers will change in the opposite direction of change in price.

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. True

  2. False

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Correct Option: B
Explanation:

False. If the demand is less than unitary elastic, the total outlay of the consumers will change in the same direction of change in price. In this case when the total expenditure rises with a rise in price and decreases with a fall in price elasticity will be less than 1.  

A firm total cost is not dependent upon which of the following?

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. Maximum retail price of the final produt

  2. Taxes

  3. Input output ratio

  4. Cost of inputs

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Correct Option: A

As per Total Revenue less Total Cost (TR - TC) approach of looking at the producer's equilibrium, which of the following condition is necessary for producer's equilibrium?

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. The difference between TR and TC is maximum

  2. Profits falls if one more unit of output is produced

  3. Both (A) and (B)

  4. Either (A) or (B)

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Correct Option: C

As per Marginal Revenue and Marginal Cost (MR and MC) approach of looking at the producer's equilibrium, which of the following condition is necessary for producer's equilibrium?

business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

  1. MR = MC

  2. MC cuts the MR curve from below

  3. Both (A) and (B)

  4. Either (A) or (B)

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Correct Option: C