Economics M.C.Q (1 Marks)

(d) Perfect Competition
Explanation: because, in a perfectly competitive market, the buyers will treat the products of all the firms in the market as homogeneous. There is zero degrees of product differentiation and the firm cannot take any control of the price.

(d) Remains Constant
Explanation: With increase in output, the difference between total cost and total variable cost will remain constant,

(c) True
Explanation: True

(d) a firm can sell any amount at the existing price
Explanation: Firm's demand curve is a horizontal straight line under perfect competition. Demand curve of the firm is perfectly elastic. It means that the firm can sell any amount of the commodity at the prevailing price. The horizontal straight line shows that the firm is to accept the price as determined by the forces of market supply and market demand; it can sell whatever amount it wishes to sell at this price.

(b) Both A and R are true but R is not the correct explanation of A.
Explanation: In a situation of increase in income less of the inferior good is purchased. The consumer prefers to shift on to superior substitutes because now he can afford them.

(d) No
Explanation: TR cannot be a horizontal straight line as TR = qty * price. TR can be calculated by adding up revenue realised from sale of every additional unit . With sale of every additional unit TR increases. So it cannot be constant and thus cannot be a horizontal line.

(a) Firms should expand output
Explanation: When MR is greater than MC , it means that the firm can earn more profit if they produce more because cost of production is less than the revenue. So they should produce more and move from abnormal profits towards equilibrium point where they can maximise their profit.

(a) What ought to be
Explanation: Normative economics is a part of economics that expresses value or normative judgements about economic fairness or what the outcome of the economy or goals of public policy ought to be.