CUET Economics MCQs Unit II Consumer Behaviour and Demand

CUET Economics Consumers Equilibrium and Demand MCQs

Question : Law of Diminishing Marginal Utility states that when more and more units of a commodity ate consumed, marginal utility:

a) begins to increase 

b) remains constant

c) begins to decrease 

d) becomes zero

Answer : C

Question : Marginal utility of a particular commodity at the point of saturation is :

a) Zero

b) Unity

c) Greater than unity

d) less than unity

Answer : A

Question : Budget line indicates :

a) Price ratio

b) Income ratio

c) Cost ratio

d) None of these

Answer : A

Question : The slope of indifference curves is measured by

a) Marginal rate of transformation

b) Marginal rate of substitution

c) Marginal rate of technical substitution 

d) None of these

Answer : C

Question : Shift in demand curve means :

a) Fall in demand due to rise in own price of the commodity 

b) Rise in demand due to fall in own price of the commodity

c) Change in demand due to factors other than the change in own price of the commodity 

d) None of these

Answer : C

Question : If two goods are complementary then rise in the price of one results in

a) Rise in demand for the other 

b) Fall in demand for the other

c) Rise in demand for both

d) None of these

Answer : B

Question : On all points of rectangular hyperbola demand curve, elasticity of demand is

a) Equal to unity

b) Zero

c) Greater than unity

d) Less than unity

Answer : A

Question : What will be the elasticity of demand (Ed) when demand curve is parallel to Y-axis?

a) Unity

b) Zero

c) Less than unity

d) More than unity

Answer : B

Question : Per unit production of the variable factor is called

a) Total product

b) Average product

c) Marginal product

d) None of these

Answer : B

Question : In case of diminishing returns :

a) Total product increases at diminishing rate

b) Total product increases at increasing rate

c) Marginal product diminishes 

d) Both(a) and (c)

Answer : D

Question : Under perfect competition, for the producer to be in equilibrium :

a) AR=MR=AC and AC must be rising 

b) AR=MR=MC and MC must be falling

c) AR=MR=MC and MC must be rising

d) AR=MR=TC and TC must be rising

Answer : C

Question : When total utility is maximum, marginal utility becomes :

a) Unity

b) Negative

c) Zero

d) Positive

Answer : C

Question : Which of the following equations is incorrect ?

a) MU= TUn+2 – TUn+1

b) MU= TU/Q

c) MU= TUn-TUn-1 

d) TU= ∑MU

Answer : B

Question : Given the fact that MRS between goods X and Y is diminishing , IC is:

a) Convex to the origin 

b) Concave to the origin

c) Straight line 

d) None of these

Answer : B

Question : Law of demand must fall in case of :

a) Normal goods 

b) Giffen goods

c) Inferior goods

d) None of these

Answer : B

Question : As a result of rise in consumer’s income , demand curve for coarse grain (inferior good) :

a) Shifts to the left 

b) Shifts to the right

c) Becomes a horizontal straight line

d) Becomes a vertical straight line

Answer : A

Question : Ed> 1 represents

a) Elastic demand

b) Inelastic demand

c) Unitary elastic demand

d) None of these

Answer : A

Question : If due to fall in price, total expenditure (Ed) when demand curve is parallel to Y-axis?

a) A case of inferior good

b) Price elasticity of demand is less than unity

c) Price elasticity of demand is greater than unity

d) Price elasticity of demand is infinity

Answer : B

Question : Which of the following equations is correct ?

a) MP= TPn-TPn-2

b) MP=AP/L

c) MP=TP/L

d) MP=∆TP/∆L

Answer : D

Question : When more and more units of a variable factor are combined with the fixed factor, the resulting law is called :

a) Law of variable proportions

b) Law of increasing Returns to Scale

c) Law of Decreasing Return to Scale

d) Law of Constant Return Scale

Answer : A

Question : In the context of producer’s equilibrium which one is wrong

a) Minimum difference between TR and TC

b) MR=MC

c) Producer gets maximum profit

d) In equilibrium situation producer has no tendency to change his production.

Answer : A

Question : If the consumer consume only one commodity ‘X’ he will be in equilibrium when :

[Here, MUx= Marginal utility of the good X (in terms of money); Px= Price of good –X]

a) MUx <Px

b) MUx= Px

c) MUx >Px

d) None of these

Answer : B

Question : Diagrammatic presentation of consumer’s indifference set is called ?

a) Indifference curve 

b) Utility curve

c) Budget line

d) Transformation curve

Answer : A

Question : An indifference curve is related to

a) Choice and preferences of the consumer

b) Consumer’s income

c) Prices of goods X and Y

d) Total utility from goods X and Y

Answer : A

Question : Inferior goods are those whose income effect is :

a) Negative

b) Positive

c) Zero

d) None of these

Answer : A

Question : The graphic presentation of a table showing price and demand relationship for a commodity in the market is called :

a) Individual demand curve 

b) Producer’s demand curve

c) Market demand curve 

d) Consumer’s demand curve

Answer : C

Question : At the mid-point of as straight line downward sloping demand curve, elasticity of demand (Ed) is

a) 2 

b) 1/2

c) 1

d) 4

Answer : C

Question : A consumer demands 5 units of a commodity at the price of ₨4 per unit. He demands 10 units when the price falls to Rs3 per unit. Price elasticity of demand is equal to :

a) 3

b) 4

c) 2

d) 1.5

Answer : B

Question : When average product (output) increase, marginal product is :

a) Equal to average product

b) Greater than average product

c) Less than average product

d) Zero

Answer : B

Question : What does break- even point indicate?

a) TR>TC

b) TR<TC

c) TR=TC

d) TC=0

Answer : C

Question : When TU is increasing at a diminishing rate, MU must be :

a) Increasing

b) Decreasing

c) Constant

d) Negative

Answer : B

Question : According to IC analysis , a consumer attains equilibrium when :

a) MRSxy = Px/Py

b) MRSxy> Px/Py

c) MRSxy< Px/Py

d) None of these

Answer : A

Question : Which of the following pairs represents substitute goods ?

a) Car and petrol 

b) Coffee and tea

c) Bread and butter

d) All of the above

Answer : B

Question : When total expenditure increases in response to decrease in the price of the commodity the elasticity of demand is :

a) Greater than unity 

b) Less than unity

c) Unity

d) Infinity

Answer : A

Question : Difference between TR and TC is maximum when

a) AR=MR

b) MR=MC

c) MR=AC

d) MC=AC

Answer : B

Question : What will be the condition of total utility when marginal utility stays positive ?

a) Maximum 

b) Diminishing

c) Increasing

d) Minimum

Answer : C

Question : How are goods X and Y when, as a result of rise in the price of good-X , demand for good-Y increases ?

a) Substitute goods

b) Complementary goods

c) Normal goods

d) Inferior goods

Answer : A

Question : When percentage change in demand is less than percentage change in price, demand is:

a) Perfectly inelastic 

b) Perfectly elastic

c) More than unitary elastic

d) less than unitary elastic

Answer : D
 

CUET Economics Cost and Revenue MCQs

Question. Suppose the total cost of production of a commodity X is 1,25,000 out of which implicit cost 35,000 and normal profit is 25,000. What would be the explicit cost of commodity?

a) 90, 000

b) 65, 000

c) 1,00,000

d) 60, 000

Answer : B

Question. Variable Costs are a function of —*

a) Output

b) Time

c) Both a) and b)

d) Neither a) nor b)

Answer : A

Question. Which of the following statement is true?

a) Marginal Cost is a sub—set of Incremental Cost

b) Incremental Cost is sub—set of Marginal Cost

c) Marginal Cost is a sub—set of Sunk Cost

d) Sunk Cost is a sub—set of

Answer : A

Question. If the following which one corresponds to Fixed Cost?

a) Payments for Raw Material

b) Labour Costs

c) Transportation Charges

d) Insurance Premium on Property

Answer : D

Question. Variable Cost includes the Cost of —

a) Buying Land and Building

b) Hire Charges paid for the Machinery

c) Salary to Manager

d) Material Bought

Answer : D

Question. The difference between Economic Cost and Accounting Cost is equal to —

a) Explicit Cost

b) Implicit Cost

c) Both a) and b)

d) Neither a) nor b)

Answer : B

Question. Marginal Cost can be defined as —

a) Change in Average Variable Cost divided by Change in Total Output

b) Change in Average Fixed Cost divided by Change in Total Output

c) Change in Total Fixed Cost divided by Change in Total Output

d) Change in Total Cost due to Change in Total Output by one additional unit.

Answer : D

Question. Marginal Cost Curve of a Firm will show ........... behaviour when compared to Marginal Product (MP) Curve.

a) Same

b) Reverse

c) Either a) or b)

d) Nothing can be said

Answer : B

Question. Marginal Costs are applicable in —

a) Short—Run

b) Long—Run

c) Both a) and b)

d) Neither a) nor b)

Answer : C

Question. The economic cost at Nicole's factory is:

a) 75000

b) 70000

c) 80000

d) 730000

Answer : B

Question. In a Cost Function, the Output Quantity is a/an-

a) Dependent Variable

b) Independent Variable

c) Either a) or b)

d) Neither a) nor b)

Answer : B

Question. Cost Analysis is the study of behaviour of Cost, in relation to —

a) Selling Prices

b) Profits

c) Total Revenue

d) One or more Production Criteria

Answer : D

Question. As output increases, Total Fixed Cost —

a) Decreases

b) Increases

c) Remains constant

d) Becomes zero

Answer : C

Question. Salary / Wages paid to Employees / Workers is an —

a) Implicit Cost

b) Explicit Cost

c) Hidden Cost

d) Undisclosed Cost

Answer : B

Question. Which of the following are considered as Economic Cost?

a) Normal Return on money Capital invested

b) Wages or Salary of the Entrepreneur

c) Interest on the Capital invested

d) All of the above

Answer : D

Question. Fixed Cost can be defined as —

a) Which does not change with output

b) Which changes with Sales

c) Which changes proportionately with output

d) All of the above

Answer : A

Question. Costs which involve payment made by the Entrepreneur to providers of other factors of production are called —

a) Explicit Cost

b) Implicit Cost

c) Variable Cost

d) Fixed Cost

Answer : A

Question. If Rent is paid to the Landlord separately, it is an

a) Implicit Cost

b) Explicit Cost

c) Hidden Cost

d) Undisclosed Cost

Answer : B

Question. Which of the following Costs is included and recorded in the books of accounts?

a) Imputed Costs

b) Opportunity Costs

c) Notional Costs

d) Explicit Costs

Answer : D

Question. involve subjective estimation.

a) Implicit Costs

b) Outlay Costs

c) Out—of—Pocket Costs

d) Accounting Costs

Answer : A

Question. Economic Profits are —

a) Difference between Total Revenue, and Total Implicit and Explicit Costs

b) Difference between Total Revenue and Total Economic Costs

c) Zero in a perfectly competitive industry in the long—run

d) All the above

Answer : D

Question. If there are Implicit Costs of Production —

a) Economic Profit will be equal to Accounting Profit.

b) Economic Profit will be less than Accounting Profit.

c) Economic Profits will be zero.

d) Economic Profit will be more than Accounting Profit.

Answer : B

Question. Reward for Entrepreneurial Ability (i.e. Normal Profit in the business) is included in —

a) Economic Cost

b) Accounting Cost

c) Explicit Cost

d) Undisclosed Cost

Answer : A

Question. A Manager needs a Stenographer and a Clerk for the Accounts Department. But, due to financial constraints, he can able to recruit only one i.e. either Stenographer or Clerk. Finally he decides to recruit the Stenographer and had to give up the idea of having an Additional Clerk in the Accounts Department. Here, the Cost of not hiring an accounts clerk is known as —

a) Accounting Cost

b) Cost Possibility Curve

c) Opportunity Cost

d) Substitution Effect

Answer : C

Question. Direct costs are __

a) Traceable costs

b) Indirect costs

c) Implicit costs

d) Explicit costs

Answer : A

Question. Which of the following will affect Marginal Costs?

a) Variable Costs

b) Output Quantity

c) Both a) and b)

d) Neither a) nor b)

Answer : C

Question. Over certain ranges of production Variable Costs vary less or more than proportionately depending on the utilisation of fixed facilities and resources during the production process. This statement is —

a) True

b) Fal se

c) Partially True

d) Nothing can be said

Answer : A

Question. Some portion of Fixed Costs cannot be avoided even when operations are suspended. These are called —

a) Discretionary Fixed Costs

b) Committed Fixed Costs

c) Variable Costs

d) Semi—Variable Costs

Answer : B

Question. When Total Revenue is less than Economic Costs, it means that the Firm —

a) Incurs Losses in the economic sense

b) Earns Normal Profits

c) Earns more than Normal Profits (i.e. Super—Normal Profits)

d) Incurs Losses in the accounting sense

Answer : A

Question. When Total Revenue is less than Accounting Costs, it means that the Firm —

a) Has No—Profit—No—Loss

b) Earns Normal Profits

c) Earns more than Normal Profits (i.e. Super—Normal Profits)

d) Incurs Losses

Answer : D

Question. Which of the following Costs does not include the contractual cash payments which the Firm makes to other Factor Owners for purchasing or hiring various factors?

a) Private Costs

b) Variable Costs

c) Accounting Costs

d) Implicit Costs

Answer : D

Question. Cost Functions are Derived Functions.

They are derived from —

a) Demand Function

b) Supply Function

c) Isoquant Function

d) Production Function

Answer : D

Question. When Total Revenue equals Accounting Costs, it means that the Firm —

a) Has No—Profit—No—Loss

b) Earns Normal Profits

c) Earns more than Normal Profits (i.e. Super—Normal Profits)

d) Incurs Losses in the accounting sense

Answer : A

Question. The Functional Relationship between Output and the Long Run Cost of Production is known as —

a) Cost Function

b) Long Run Cost Function

c) Short Run Cost Function

d) Output Function

Answer : B

Question. Expansion of Scale of operation forms a part of ...... Cost Function.

a) Long run

b) Short run

c) Fixed

d) Both b) and c)

Answer : A

Question. are readily identified and are traceable to a particular product, service, operation or plant.

a) Direct Costs

b) Indirect Costs

c) Both a) and b)

d) Neither a) nor b)

Answer : A

Question. Economic Cost includes—

a) Accounting Cost + Non— Accounting Cost

b) Fixed Cost + Variable Cost

c) Explicit Cost + Implicit Cost

d) Short Run Cost + Long Run Cost

Answer : C

Question. Incremental Cost 100Cost is not relevant for Decision—Making

a) Economic

b) Opportunity

c) Sunk

d) Incremental Cost

Answer : C

Question. With which of the following is the concept of Marginal Cost closely related?

a) Variable Cost

b) Fixed Cost

c) Opportunity Cost

d) Economic Cost

Answer : A

Question. Economic Cost includes —

a) Wages paid to Workers / Labourers

b) Rent for Land and Building used in business

c) Normal Rate of Profit in the business

d) All of the above

Answer : D

Question. Under perfect competition :

a) MR curve is below AR curve      

b) Price = AR = MR

c) AR remains constant

d) both b) and c)

Answer : D

Question. Which is the following statements is appropriate in case of monopoly?

a) AR curve slopes upwards while MR curve slopes downwards

b) Slope of both AR and MR curves is upward

c) Slope of both AR and MR curves is downwards and MR curve is below AR curve

d) Slope of both AR and MR curves is downwards and MR curve is above AR curve

Answer : C

Question. Opportunity Costs are a result of —

a) Technology obsolescence

b) Overproduction

c) Scarcity

d) Abundance of resources

Answer : C

Question. When Entrepreneur himself manages the business, the reward for Entrepreneurial Ability (i.e. Profit) is an —

a) Implicit Cost

b) Explicit Cost

c) Hidden Cost

d) Undisclosed Cost

Answer : A

Question. Which Cost increases continuously with the increase in production?

a) Average Cost

b) Marginal Cost

c) Fixed Cost

d) Variable Cost

Answer : D
 

CUET Economics Producer Behavior and Supply MCQs

Question : Movement along the supply curve occurs due to :

a) Increase in own price of the commodity

b) Decrease in own price of the commodity

c) Facton other than own price of the commodity

d) Both (a) and (b)

Answer : D

Question : The rise in supply due to rise in price is called:

a) Increase in supply

b) Decrease in supply

c) Extension of supply

d) None of these

Answer : C

Question : MC=MR=AC=AR refers to long term equilibrium of 

a) Competitive firm

b) Oligopoly firm

c) Monopoly firm

d) None of these

Answer : B

Question : At break-even point , a firm makes :

a) Normal profits

b) Extra normal profits

c) Extra normal losses

d) None of these 

Answer : A

Question : If elasticity of supply is equal to unity, what will be the percentage increase in supply as a result of 15 percent rise in price of a commodity?

a) 8%

b) 12%

c) 0% 

d) 15%

Answer : D

Question : When supply falls due to factors other than own price of the commodity it indicates

a) Contraction in supply

b) Decrease in supply

c) Extension in supply

d) None of these

Answer : B

Question : Which of the following indicates fixed cost?

a) Electricity bill

b) Expenses on raw material

c) Wages of daily workers

d) Interest on fixed capital

Answer : D

Question : The costs which do change with change in the quantity of output are called:

a) Supplementary costs        

b) Money costs 

c) Real costs     

d) None of these

Answer : A

Question :  A firm reaches shut down point when 

a) TR=TVC    

b) TR=TC

c) TC = AVC

d) MC=AC

Answer : A

Question :  An  upward sloping straight line supply curve shooting from the X- axis indicates that:

a) Elasticity of supply is equal to zero       

b) Elasticity of supply is equal to one

c) Elasticity of supply is greater than one

d) Elasticity of supply is less than one

Answer : C

Question : When MC curve cuts AC curse:

a) AC= MC       

b) AC< MC

c) AC> MC

d) Both AC and MC are falling

Answer : A

Question : If 8% rise in price causes 27% increase in supply, elasticity of supply will be :

a) 1.5    

b) 0.5

c) 3.5  

d) 2.5

Answer : A

Question : Which one of the following is correct?

a) TC= TFC x TVC

b) TC= TFC / TVC

c) TC= TFC + TVC

d) TC= TFC- TVC

Answer : C

Question : When production level is zero, then fixed cost is:

a) Zero

b) Negative

c) Positive

d) Equal to variable cost 

Answer : C

Question : Which of the following statements is correct?

a) There is difference between supply and stock

b) Supply does not depend on governments tax- policy

c) Stock refers to the quantity which comes to market for sale

d) Stock and supply are always equal

Answer : A

Question : Average fixed cost (AFC) is indicated by:

a) Rectangular hyperbola

b) a straight line parallel to X- axis

c) a straight line parallel X- axis

d) U- shaped curve

Answer : A

Question : Normal profits occur when

a) AR>AC

b) AR=AC

c) AR<AC

d) TR>TC

Answer : B

Question : When production is zero, total cost (TC) will be:

a) Zero

b) Equal to variable cost

c) Equal to total fixed cost  

d) Equal to marginal cost

Answer : B

CUET Economics The Theory of Firm Under Perfect Competition MCQs

Question : The concept of supply curve is relevant only for?

a) Monopoly

b) Monopolistic competition

c) Perfect competition

d) Oligopoly

Answer : C

Question : All of the following are examples of product differentiation in monopolistic competition EXCEPT      

a) new and improved packaging.

b) lower price.

c) acceptance of more credit cards than the competition.

d) location of the retail store.

Answer : B

Question : Total economic profit is

a) total revenue minus total opportunity cost.

b) marginal revenue minus marginal cost.

c) total revenue divided by total cost.

d) marginal revenue divided by marginal cost.

Answer : A

Question :  In the above table, the firm 

a) must be in a perfectly competitive industry, because its marginal revenue is constant.

b) cannot be in a perfectly competitive industry, because its short-run economic profits are greater than zero.

c) cannot be in a perfectly competitive industry, because its long-run economic profits are greater than zero.

d) must be in a perfectly competitive industry, because its marginal cost curve eventually rises

Answer : A

Question : For a firm in perfect competition, a diagram shows quantity on the horizontal axis and both the firm's marginal cost (Mc) and its marginal revenue (MR) on the vertical axis. The firm's profit-maximizing quantity occurs at the point where the 

a) MC curve intersects the MR curve from above, going from left to right.

b) slope of the MC curve is zero.

c) MC curve intersects the MR curve from below, going from left to right.

d) MC and MR curves are parallel.

Answer : C

Question : In perfect competition, since the firm is a price taker, the ________ curve is straight line

a) Total cost

b) Marginal cost

c) Total revenue

d) Marginal revenue

Answer : D

Question : Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip 

a) earns an economic profit, but should shut down in the short run.

b) incurs an economic loss, but should stay open in the short run.

c) incurs an economic loss and should shut down in the short run.

d) earns an economic profit and should stay open in the short run.

Answer : B

Question : The short-run supply curve for a perfectly competitive firm is its 

a) marginal cost curve above the horizontal axis.

b) average cost curve above the horizontal axis.

c) average cost curve above its shutdown point.

d) marginal cost curve above its shutdown point.

Answer : D

Question :  In a perfectly competitive industry, the industry supply curve is the sum of the 

a) average total cost curves of all the individual firms.

b) supply curves of all the individual firms.

c) average variable cost curves of all the individual firms.

d) average fixed cost curves of all the individual firms.

Answer : B

Question : Market situation where there is only one buyer is: 

a) Monopoly

b) Monopsony

c) Duropoly

d) None of these

Answer : B

Question : External economies are factors beyond the control of an individual firm that ________ as the total industry output increases. 

a) raise its marginal revenue

b) raise its costs

c) lower its costs

d) lower its profit

Answer : C

Question : Among the obstacles to the efficient allocation of resources are all of the following EXCEPT 

a) competition.

b) monopoly.

c) external benefits.

d) external costs.

Answer : A

Question : In perfect competition, in the long run, ______________?

a) There are large profits for the firm

b) There is no profit and no loss for the firm

c) There are negligible profits for the firm

d) There are large losses for the firm

Answer : B

Question : Firms face competition when the good they produce  

a) is in a market with natural barriers to entry.

b) is unique.

c) is in a market with legal barriers to entry.

d) has a close substitute.

Answer : D

Question : In perfect competition, the elasticity of demand for the product of a single firm is 

a) infinite, because many other firms produce identical products.

b) zero, because many other firms produce identical products.

c) zero, because the firm produces a unique product.

d) infinite, because the firm produces a unique product.

Answer : A

Question : In the above table, if the quantity sold by the firm rises from 6 to 7, its marginal revenue is 

a) $90.

b) $30.

c) $105.

d) $15.

Answer : D

Question :  Which of the following is NOT correct about patents?     

a) Patents stimulate innovation.

b) A patent is a barrier to entry.

c) Patents enable a firm to be a permanent monopoly.

d) Patents encourage invention of new products.

Answer : C

Question : Which statement is correct ? 

a) In very short period, supply is perfectly inelastic, price is affected by both demand conditions.

b) Supply curve elasticity depends on time period

c) Both a) and b)

d) None of the above

Answer : C

Question :  While a seller under perfect competition equates price and MC to maximize profits a monopolist should equate?

a) MR and MC

b) AR and MR

c) AR and MC

d) TC and TR

Answer : A

Question : The figure represents a firm in a perfectly competitive market. If the firm does not shut down, the least amount of output that it will produce is 

a) 10 units.

b) 8 units.

c) 5 units.

d) less than 5 units

Answer : B

Question : An industry with a large number of firms, differentiated products, and free entry and exit is called     

a) oligopoly.

b) monopoly.

c) monopolistic competition.

d) perfect competition.

Answer : C

Question : If the cost curves shown in the above figure apply to all firms in the industry and the initial price is P1, in the long run the price will be 

a) greater than P1.

b) zero.

c) equal to P1.

d) less than P1

Answer : D

Question : In the short run, a perfectly competitive firm can 

a) earn a normal profit.

b) incur an economic loss.

c) earn an economic profit.

d) earn an economic profit, earn a normal profit, or incur an economic loss.

Answer : D

Question : The elasticity at a point on a straight line supply curve passing through the origin will be

a) 3.0

b) 1.0

c) 4.0

d) 2.0

Answer : B

Question : Perfect competition is an industry with 

a) a few firms producing identical goods.

b) many firms producing goods that differ somewhat.

c) a few firms producing goods that differ somewhat in quality.

d) many firms producing identical goods.

Answer : D

Question : The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm 

a) has perfect information.

b) wants to maximize its profits.

c) is a price taker.

d) faces constant returns to scale

Answer : C

Question : Which of the following is different about perfect competition and monopolistic competition?     

a) Firms in monopolistic competition compete on their product's price as well as its quality and marketing.

b) In monopolistic competition, entry into the industry is unblocked.

c) Perfect competition has a large number of independently acting sellers.

d) Only firms in monopolistic competition can earn an economic profit in the short run.

Answer : A

Question :  Which one is a feature of monopolistic competition ? 

a) Differentiated Product

b) Selling Cost

c) Imperfect Knowledge of the Market

d) All the above

Answer : D

Question : Which of the following would create a natural monopoly?  

a) requirement of a government license before the firm can sell the good or service

b) technology enabling a single firm to produce at a lower average cost than two or more firms

c) an exclusive right granted to supply a good or service

d) ownership of all the available units of a necessary input

Answer : B

Question : In perfect competition, a firm: 

a) Determines price

b) Obtains price

c) Both a) and b)

d) None of these

Answer : B

Question :  The demand for a product produced in a perfectly competitive market permanently increases. In the short run the price 

a) rises and each firm produces less output.

b) does not change because each firm produces more output.

c) rises and each firm produces more output.

d) does not change as new firms enter the industry.

Answer : C

Question : In perfect competition, a firm earns profit when __________ exceeds the _____________?

a)Total revenue, total fixed cost

b)Marginal cost, marginal revenue

c)Average revenue, average cost"

d)Total cost, total revenue

Answer : C