Question

Question 2 [10] TRUE/FALSE QUESTIONS Consider the following list of statements. Each statement is either true or false. You must read each statement carefully and then select the option that you believe is correct as your answer. In your answer book, write down only the question number and next to the number either True or False. Example: If you believe sub-question 2.11 is true, then write down: 2.11. True. 2.1. 2.2. 2.3. Peter is a plumber. He employs three workers and has some capital in the form Pe of a small van, plumbing tools and other plumbing equipment. The long run for Peter can be defined as the time it takes Peter to buy an additional van. If price elasticity of demand is 1.6 and a firm reduces the price of its product by 10%, it would expect its total revenue to decrease by 6%. The profit-maximising level of output for a perfectly competitive firm is where average revenue equals average total cost. A perfectly competitive firm will continue producing in the short run as long as it covers its variable cost. A downward-sloping demand curve exists for a monopolist, but not a perfectly competitive firm. 2.4. 2.5.

Answer 1

2.1 True

Van is considered to be a capital, and capital can increased or decreased only in the long run. So, buying a new van, shows long run scenario.

2.2 False

Here, revenue will increase to the tune of 16%, if price decreases by 10%.

2.3 False

It is MR = MC for a profit maximizing output.

2.4 True

Afterwards, the firm will shutdown if price is lower than the average variable cost.

2.5 True

For perfectly competitive firm, the demand curve will be horizontal in nature.