Qty AFC ATC MC 0 - - - 1 80.00 100.00 20 2 40.00 58.00 17 3 26.66 44.00 15 4 20.00 36.25 13 5 16.00 31.40 12 6 13.33 28.33 13 7 11.42 26.29 14 8 10.00 26.13 25 9 8.88 26.56 30 10 8.00 27.56 34 11 7.27 28.30 40 12 6.66 30.00 47 13 6.15 31.92 55 If the market price is Rs. 31, the firm will produce:

9 units at an economic profit of Rs. 40

10 units at an economic profit of Rs. 67

9 units at an economic profit of Rs. 81

Zero units of output and lose its fixed cost in the short run

MCQ Questions for Class 11 Commerce Economics The Theory Of The Firm Under Perfect Competition Quiz 8

A firm reaches shut-down point when:

0%
$AR = AVC$
0%
$TR = TC$
0%
$TC = AVC$
0%
$MC = AC$

In case of break-even point, a firm covers:

0%
variable cost only
0%
fixed cost only
0%
both fixed costs and variable costs
0%
none of the above

In case of perfect competition, products of all firms in the industry are ________.

0%
close substitutes of each other
0%
close substitutes supported with advertisement
0%
differentiated products supported with advertisement
0%
perfect substitutes of each other

Shut-down point occurs when a firm is just covering its fixed costs only.

0%
True
0%
False

Explanation

Shut-down point occurs when a firm is just covering its variable costs only. Or, it is a situation when:

$TR = TVC$ or

$AR = AVC$ .

The slope of a tangent to any point on the total revenue curve shows ________.

0%
marginal revenue
0%
average revenue
0%
price per unit
0%
none of the above

Normal profit means _____________.

0%
the profit made by the marginal entrepreneur in a normal year
0%
the payment made to the marginal entrepreneur for his abilities
0%
the surplus profit made by the least efficient firms
0%
the payment needed to keep an entrepreneur in an industry

A perfectly competitive firm will always expand output as long as __________.

0%
rising marginal cost is less than price
0%
rising marginal cost is less than the marginal revenue
0%
rising marginal cost is less than the average cost
0%
none of the above

One would expect a firm to close down rather than continue producing in the short-period if ___________.

0%
total revenue were more than total variable cost
0%
total revenue were less than total variable cost
0%
variable costs were to fall below fixed costs
0%
variable costs were to rise above fixed costs

In all forms of imperfect competition, the average revenue curve facing the individual slopes ___________.

0%
upward
0%
downward
0%
horizontally
0%
vertically

At the shut-down point, ____________.

0%
P=AVC
0%
TR=TVC
0%
The total losses of the firm equal TFC
0%
all of the above

If more firms enter a competitive industry the theory predicts that ________.

0%
both marginal and average cost curves rises
0%
the industry short-run supply curves shift upwards to the right
0%
output of every firm increases
0%
the price of the product rises

For a perfectly competitive firm, there are only normal profits in the long run.

0%
True
0%
False

"I am making a loss, but with the rent I have to pay, I can't afford to shutdown at this point of time." If this entrepreneur is attempting to maximize profits or minimize losses, his behaviour in the short run is _____________.

0%
rational, if the firm is covering its variable cost
0%
rational, if the firm is covering its fixed costs
0%
irrational, since plant closing is necessary to eliminate losses
0%
irrational, since fixed costs are eliminated of a firm shuts down

Under perfect market and in case of decreasing marginal cost the firm's equilibrium with respect to level of production _________.

0%
cannot be achieved
0%
can be achieved after a small level of output
0%
can be achieved after a high level of output
0%
will result in run-away inflation

Which is the best definition of the marginal firm?

0%
The firm with the largest profit.
0%
The firm with the lowest costs.
0%
The firm which makes only normal profit.
0%
The firm which equates its marginal cost with marginal revenue.

In the short-run, a firm would remain in business as long as which one of the following costs is covered?

0%
Total costs
0%
Fixed costs
0%
Variable costs
0%
Constant costs

Vivaan decided to join a NCC camp this year which required an entry fee of

$Rs. 1,500$ during the summer vacation by not opting for usual part time job which he used to do in other years and earn

$Rs. 5,000$ . What will be the opportunity cost in this case?

0%
$Rs. 1,500$
0%
$Rs. 5,000$
0%
$Rs. 6,500$
0%
Can't be determined

If the market price drops from Rs. 100 to Rs. 56, the firm's short run response should be to:

0%
Shut down
0%
Produce 5 units
0%
Produce 20 units
0%
Continue to produce the same number of units as before the drop in price

Explanation

If market price is 56 (i.e.,

$P = AR = MR$ ) and MC is 56 at the output of 20 units,

$MC = MR$ .

Quantity (Q)	Variable cost (VC)	Fixed cost (FC)	Total cost (TC)	Average variable cost (AVC)	Average total cost (ATC)	Marginal cost (MC)
0	0	300	300	-	-	-
5	250	300	550	50	110	50
10	470	300	770	47	77	44
15	700	300	1000	46.67	66.67	46
20	980	300	1280	49	64	56
25	1350	300	1650	54	66	74
30	1850	300	2150	61.67	71.67	100
35	2520	300	2820	72	80.57	134
40	3400	300	3700	85	92.5	176
45	4530	300	4830	100.67	107.33	226
50	5950	300	6250	119	125	284

An entrepreneur will stay in business in the long run as long as he meets:

0%
His domestic expenditure
0%
All costs of production
0%
Fixed costs of production
0%
Variable costs of production

In a situation of perfectly elastic supply, price of the commodity tends to remain constant, no matter demand increases or decreases.

0%
True
0%
False

To maximize profit, the firm should produce ________.

0%
15 units
0%
30 units
0%
35 units
0%
50 units

Which of the following is correct?

0%
If marginal revenue is positive and falling, total revenue will rise at a decreasing rate.
0%
Total revenue is equal to price times the quantity sold.
0%
Under perfect competition, total revenue is equal to marginal revenue times the quantity sold.
0%
All of the above

State whether the following statement is True or False:
Supply of perishable goods is inelasitc.

0%
True
0%
False

To maximize its profit, the firm should produce:

0%
0 units
0%
3 units
0%
5 units
0%
7 units

Explanation

The firm earns maximum profit at the level of production where

$MR = MC$ . At the level of production of 7 units, marginal revenue

$=$ marginal cost

$= 52$ .

Production (Q)	Price per unit (P)	Total Cost (TC)	Marginal cost (MC)	Total revenue (TR)
0	130	45	-	0
1	124	88	43	124
2	118	125	37	236
3	112	159	34	336
4	106	193	34	424
5	100	230	37	500
6	94	273	43	564
7	88	325	52	616
8	82	389	64	656
9	76	465	76	684

$Formulas:$
TR

$= P \times Q$
MC

$= TC_{n} - TC_{n-1}$
MR

$= TR_{n} - TR_{n-1}$

Qty	AFC	ATC	MC
0	-	-	-
1	80.00	100.00	20
2	40.00	58.00	17
3	26.66	44.00	15
4	20.00	36.25	13
5	16.00	31.40	12
6	13.33	28.33	13
7	11.42	26.29	14
8	10.00	26.13	25
9	8.88	26.56	30
10	8.00	27.56	34
11	7.27	28.30	40
12	6.66	30.00	47
13	6.15	31.92	55

If the market price is Rs. 31, the firm will produce:

0%
9 units at an economic profit of Rs. 40
0%
10 units at an economic profit of Rs. 67
0%
9 units at an economic profit of Rs. 81
0%
Zero units of output and lose its fixed cost in the short run

Explanation

At the level of production of 9 units, MC is 30 whereas MR is 31 and a perfectly competitive firm can produce at a level of output where MC

$=$ MR. MC can be less than MR, but not more than MR.
At 9 units,
TR

$= 9 \times 31 = 279$
TC

$= 9 \times 26.56 = 239$
Profit/Loss

$=$ TR-TC

$= 279 - 239 = Rs.40$ (profit)

When production equals 5 units, the firm's total revenue is :

0%
Rs. 100
0%
Rs. 270
0%
Rs. 324
0%
Rs. 500

Explanation

Production (Q)	Price per unit (P)	Total Cost (TC)	Marginal cost (MC)	Total revenue (TR)
0	130	45	-	0
1	124	88	43	124
2	118	125	37	236
3	112	159	34	336
4	106	193	34	424
5	100	230	37	500
6	94	273	43	564
7	88	325	52	616
8	82	389	64	656
9	76	465	76	684

$Formulas:$
TR

$= P \times Q$
MC

$= TC_{n} - TC_{n-1}$
MR

$= TR_{n} - TR_{n-1}$

When production equals 4 units, the firm's MR is ________.

0%
72
0%
100
0%
88
0%
76

Explanation

Production (Q)	Price per unit (P)	Total Cost (TC)	Marginal cost (MC)	Total revenue (TR)
0	130	45	-	0
1	124	88	43	124
2	118	125	37	236
3	112	159	34	336
4	106	193	34	424
5	100	230	37	500
6	94	273	43	564
7	88	325	52	616
8	82	389	64	656
9	76	465	76	684

$Formulas:$
TR

$= P \times Q$
MC

$= TC_{n} - TC_{n-1}$
MR

$= TR_{n} - TR_{n-1}$

Qty	AFC	ATC	MC
0	-	-	-
1	80.00	100.00	20
2	40.00	58.00	17
3	26.66	44.00	15
4	20.00	36.25	13
5	16.00	31.40	12
6	13.33	28.33	13
7	11.42	26.29	14
8	10.00	26.13	25
9	8.88	26.56	30
10	8.00	27.56	34
11	7.27	28.30	40
12	6.66	30.00	47
13	6.15	31.92	55

If the price of the good is Rs. 13, the firm will produce ____.

0%
4 units at a loss of Rs. 93
0%
6 units at a loss of Rs. 92
0%
zero units at a loss of Rs. 80
0%
8 units at a loss of Rs. 9

Explanation

Firm can either produce 4 units or 6 units, at which

$MC =MR$ . However, the firm will also consider that

$P \ge AVC.$
AVC at 4 units is

$36.25 -20 = 16.25$ and at 6 units is

$28.33 - 13.33 = 15$ .
Thus,

$AVC > P$ at both 4 units as well as 6 units.
Hence, it would be better for the firm to produce zero output and incur losses of fixed cost only, i.e.,

$Rs. 80.$

Qty	AFC	ATC	MC
0	-	-	-
1	80.00	100.00	20
2	40.00	58.00	17
3	26.66	44.00	15
4	20.00	36.25	13
5	16.00	31.40	12
6	13.33	28.33	13
7	11.42	26.29	14
8	10.00	26.13	25
9	8.88	26.56	30
10	8.00	27.56	34
11	7.27	28.30	40
12	6.66	30.00	47
13	6.15	31.92	55

If price is Rs. 34, the perfectly competitive firm will:

0%
Shut down
0%
Produce 10 units
0%
Produce 11 units
0%
Produce 13 units

Supply curve will shift when ____________.

0%
Price falls
0%
Price rises
0%
Demand shots
0%
Technology changes

CBSE Questions for Class 11 Commerce Economics The Theory Of The Firm Under Perfect Competition Quiz 8 - MCQExams.com

0:0:1

Practice Class 11 Commerce Economics Quiz Questions and Answers

CBSE Questions for Class 11 Commerce Economics The Theory Of The Firm Under Perfect Competition Quiz 8 - MCQExams.com

0:0:1

Practice Class 11 Commerce Economics Quiz Questions and Answers

Support mcqexams.com by disabling your adblocker.