Tag: liquidity preference and profit

Questions Related to liquidity preference and profit

The average revenue curve of a firm under pure monopoly will be a _______________.

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. Straight line

  2. Vertical line

  3. Downwards slope

  4. Rectangular hyperbola

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Correct Option: C

Government can eliminate all monopoly profits by setting a price equal to ______________.

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. Average variable cost

  2. Average cost

  3. Average fixed cost

  4. Marginal cost

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Correct Option: B
Explanation:

 The government requires the monopoly to set a price equal to average cost. That is, it requires the firm to choose an (output, price) pair for which AC is equal to AR. This regulation eliminates profit, but does not necessarily lead to an efficient outcome.

In monopolistic competition, the average revenue curve of the firm is ______________.

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. less elastic

  2. more elastic

  3. unit elastic

  4. None of the above

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Correct Option: B
Explanation:

Average curve will be considerably more elastic  because the monopolistically competitive firm has less control over the price that it can charge for its output.

The demand curve under monopolistic competition is _______________.

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. Horizontal

  2. Infinitely elastic

  3. Negatively sloped and highly elastic

  4. Negatively sloped and highly inelastic

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Correct Option: C
Explanation:

The demand curve for an individual firm is downward sloping in monopolistic competition, in contrast to perfect competition where the firm's individual demand curve is perfectly elastic. This is due to the fact that firms have market power: they can raise prices without losing all of their customers.

The upper position of the kinked demand curve is relatively __________.

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. less elastic

  2. more elastic

  3. more inelastic

  4. inelastic

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Correct Option: B

For a monopoly firm, __________.

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. the price depends on the quantity of the commodity sold

  2. price is a decreasing function of the quantity sold

  3. The market demand curve shows the quantities that consumers as a whole are willing to purchase at different prices.

  4. Both A and B

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Correct Option: D

The quantity purchased by the consumers is  _______ function of the price.

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. increasing

  2. decreasing

  3. not a 

  4. none of these

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Correct Option: B

 _____ is the most visible exception to the inverse relationship of competitive market structure and competitive 

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. Perfect competition

  2. Pure monopoly

  3. Oligopoly

  4. None of the above

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Correct Option: B
Explanation:
Competitive behaviour and competitive market structure are, in general,  inversely related; the more competitive the market structure, less competitive  is the behaviour of the firms. On the other hand, the less competitive the market structure, the more competitive is the behaviour of firms towards each other. Pure monopoly is the most visible exception. In a pure monopoly, there is only one seller, there is no competition in the market structure.

Individual farmers don't compete among themselves to sell a larger amount of crop because ______. 

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. the individual farmer does not possess the power to influence the market price of the crop

  2. the given statement is false. They do compete.

  3. the individual farmer doesn't have the means

  4. none of these

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Correct Option: A

A __________ has been defined as one where an individual firm is unable to influence the price at which the product is sold in the market.

economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

  1. perfectly competitive market

  2. oligopoly

  3. monopoly

  4. none of these

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Correct Option: A