Question

Styles Paragraph Font 21. If a fim under perfect competition decreases its output a) The market price will decrease b) The market price will remain unaffected c) The market price will increase d) All of the above 22. By producing the quantity of output where marginal revenue (MR) equals marginal cost MC), a fim will a) Maximize total revenues b) Maximize economic profits e) Minimize costs d) Minimize revenues 23. The demand curve faced by the monopoly firm a) Is the same as the industry curve b) Slopes downwards to the right c) Shows that in order to sell more, the firm must lower price d) All of the above Quantity (Q) LTotal Revenue (TR) 0 3 $30 $60 $90 1 4 6 S0 $150 $120 $180 In the above table, the price of the product is 24 a) $30 b) S150 c) $147 d) $180 1463words Fous Type here to search

Answer 1

Answer

21)

The correct answer is (b) the market price will remain unaffected.

A perfect competitive firm is a price taking firm and hence charges price determined by the market. So, A firm under perfect competitive market has no market power and hence its change in output will not affect Overall price level of the market and hence Market Price will remain unaffected.

Hence, the correct answer is (b) the market price will remain unaffected

22)

the correct answer is (b) Maximize economic Profit

Profit(Pr) = TR - TC

where TR = Total revenue and MR = Marginal Revenue

Maximize: Pr

First order condition :

d(Pr)/dQ = 0 => d(TR - TC)/dQ = 0 where Q = Quantity

=> d(TR)/dQ - d(TC)/dQ = 0 => MR - MC = 0

=> MR = MC

Here MC = Marginal Cost = d(TC)/dQ,  MR = Marginal Revenue = d(TR)/dQ

Thus, Profit is maximized when MR = MC i.e. Marginal Revenue = Marginal Cost

Hence, the correct answer is (b) Maximize economic Profit.

(23)

The correct answer is (d) All of the above.

If there is a monopoly then this means that there is only 1 firm in the market and hence Demand faced by the industry is similar to the demand faced by a monopolist because there is only one firm(or one organization). Hence option (a) is the correct answer.

According to law of demand If quantity Price increases then quantity demand will decrease and vice versa where all else remain constant. Thus, Industry demand will be downward sloping and hence demand curve of a monopolist is a downward sloping curve. Hence, option (b) is also correct.

As discussed above that demand faced by a monopolist ts a downward sloping and hence, If he wants to sell or supply more he will have to lower its price..So, option (c) is also correct.

Hence, the correct answer is (d) All of the above.

(24)

The correct answer is (a) $30.

Total Revenue = Price (Quantity.

When Quantity = 1 , Total Revenue = 30

Thus 30 = Price*1

=> Price = 39

Thus, Market Price of the product = 30(You can check this for any other quantity here).

Hence, the correct answer is (a) $30.