Q. Which is the first-order condition for the profit of a firm to be maximum? AC = MR MC = MR MR = AR AC = AR Answer: MC = MR
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Q. What is the shape of the demand curve faced by a firm under perfect competition? A. Horizontal B. Vertical C. Positively sloped D. Negatively sloped Answer: Horizontal
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Q. Which of the following is not an essential condition of pure competition? A. Large number of buyers and sellers B. Homogeneous product C. Freedom of entry D. Absence of transport cost Answer: Absence of transport cost
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Q. A monopolist is able to maximize his profit when: A. His output is maximum B. He charges a high price C. His average cost is minimum D. His maginal revenue is equal to marginal cost Answer: His maginal revenue is equal to marginal cost
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Q. With which of the following is the concept of marginal cost closely related? A. Variable cost B. Fixed cost C. Implicit cost D. Explicit cost Answer: Variable cost
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Q. According to M. Kalecki, the true measure of the degree of monopoly power is the: A. Ratio between price and marginal cost B. Extent of monopolistic profit enjoyed by the monopolist C. Cross-elasticity of demand for the product of the monopolist D. Price charged by the monopoliist minus marginal cost of production Answer: Ratio
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Q. According to current thinking, the law of diminishing returns applies to: A. All fields of production B. Agriculture C. Mining D. Manufacturing Answer: All fields of production
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Q. The cost of one thing in terms of the alternative given up is known as: A. Production cost B. Physical cost C. Real cost D. Opportunity cost Answer: Opportunity cost
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Q. Elasticity of supply refers to the degree of responsiveness of supply of a commodity to changes in its: A. Demand B. Price C. Costs of production D. State of technology Answer: Price
Q. An increase in the supply of a commodity is caused by: A. Improvements in its technology B. Fall in the prices of other commodities C. Fall in the prices of factors of production D. All of the above Answer: All of the above
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