Tag: liquidity preference and profit

Questions Related to liquidity preference and profit

In the table below that will be equilibrium market price?

Price (Rs.) Demand (tonnes per annum) Supply (tonnes per annum)
12345678 1,000900800700600500400300 4005006007008009001,0001,100
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. Rs. 2

  2. Rs. 3

  3. Rs. 4

  4. Rs. 5

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Correct Option: C
Explanation:

Equilibrium market price is a point where the demand equals the supply for a particular commodity. Hence, in the given illustration, demand (700) is equal to supply (700) at Rs.4. Hence, it is equilibrium market price.

If the supply of bottled water decreases, the equilibrium price ___________ and the equilibrium quantity ___________.

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. Increases; decreases

  2. Decreases; increases

  3. Decreases; decreases

  4. Increases; increases

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Correct Option: A
Explanation:

If demand decreases and supply increases then equilibrium quantity could go up, down, or stay the same, and equilibrium price will go down. If demand decreases and supply decreases then equilibrium quantity goes down, and the equilibrium price could go up, down, or stay the same

Which of the following would not, of itself, cause a shift of the demand curve for a product?

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. A change in consumers preference

  2. A change in consumer income

  3. A change in the price of the product

  4. A change in the price of related products

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Correct Option: C
Explanation:

A change in the price of the product leads to movement along the demand curve and not a shift in the demand curve.

Equilibrium level of output for the pure monopolist is where _________.

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. $MR>MC$

  3. $MR< MC$

  4. $P< AC$

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Correct Option: A

Under monopoly form of market, TR is maximum when __________.

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 is zero

  2. MR is maximum.

  3. $MR > 0$

  4. $MR < 0$

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Correct Option: A

When does a firm maximize its profit in an imperfect competition?

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

  1. $MR > MC$

  2. $MR < MC$

  3. $MR=MC$

  4. $MR+MC=0$

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Correct Option: C

An increase in demand while supply remains unchanged causes equilibrium price and quantity to ________.

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. decrease

  2. increase

  3. rise initially and then fall

  4. none of the above

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Correct Option: B
Explanation:

An increase in demand while the supply remains unchanged causes equilibrium price and quantity to increase. Due to increase in demand the quantity demanded will increase this will thereby increase competition in the market which will leaf to increase in price of the product. hence, when the price increases demand decreases to reach to equilibrium and new equilibrium quantity and price will be derived. 

Equating marginal cost and marginal revenue the competitive firm can maximize its profit in _________.

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 long run

  2. the short run

  3. the market period

  4. none of the above

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Correct Option: B

Using total revenue and total cost curves, the level of output that gives maximum profits will be one where ___________.

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. TR and TC curves intersect

  2. where the gap between TR and TC is maximum and TR curve lies below TC curve

  3. where the gap between TR and TC is maximum and TR curve lies above TC curve

  4. can't be determined

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Correct Option: C
Producer's equilibrium is a situation of 'revenue maximisation'.
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:

Producer's equilibrium refers to a situation of profit maximization.
It is only when (a) MR = MC, and (b) MC is rising, these two conditions are satisfied, then a producer will reach the point of his equilibrium and maximizing his profit.