Tag: liquidity preference and profit

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Questions Related to liquidity preference and profit

Multiple choice economics producer's equilibrium equilibrium of a firm shifts in demand and supply liquidity preference and profit

In a long run equilibrium of a competitive firm _______________.

  1. fixed cost vanishes

  2. Average fixed cost curve vanishes

  3. Average total cost are present

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

In the long run, all costs are variable, meaning there are no fixed costs. Therefore, the average fixed cost curve disappears, and the firm's costs are represented by the long-run average total cost curve.

Multiple choice economics producer's equilibrium equilibrium of a firm shifts in demand and supply liquidity preference and profit

In the long run, there is enough time for the Firm to cover its Losses and earn Normal Profits. This is because in the long run, all inputs are-

  1. Identical

  2. Homogeneous

  3. Variable

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

In the long run, all inputs are variable, allowing firms to adjust their scale of operations, enter or exit the market, and eliminate losses or excess profits to reach a state of normal profit.

Multiple choice economics producer's equilibrium equilibrium of a firm shifts in demand and supply liquidity preference and profit

Time element was conceived by _________.

  1. Adam Smith

  2. Alfred Marshall

  3. Pigou

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

Time element was propounded by Alfred Marshall with respect to price discrimination. He said that demand and supply and the price all these factors should be managed by the seller perfectly on time to earn huge profits. Hence, time element was conceived by Alfred Marshall.

Multiple choice economics producer's equilibrium equilibrium of a firm shifts in demand and supply liquidity preference and profit
If the firm increases its output even after $MR = MC$ and an equilibrium is struck, then:

  1. $MR$ becomes greater than $MC$

  2. $MC$ becomes greater than $MR$

  3. $MR$ stays equal to $MC$

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

If a firm produces beyond the point where Marginal Revenue (MR) equals Marginal Cost (MC), the cost of producing the additional unit (MC) will exceed the revenue gained from it (MR), thereby reducing total profit.