Q1: Normal profit occurs when
Answer
Answer: Average revenue equals average cost
Q2: Oligopolistic industries are characterized by
Answer
Answer: a few dominant firms and substantial entry barriers.
Q3: One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases
Answer
Answer: a very few forms producing a homogeneous product.
Q4: Opportunity cost refers to
Answer
Answer: The expected return from the second best alternative use of the resource
Q5: Price discrimination involves changing different prices for a commodity
Answer
Answer: all of these—(a) for different quantities purchases
(b) to different classes of customers
(c) in different markets
Q6: Price discrimination refers to
Answer
Answer: the seling of a given product at different prices that do not reflect cost differences
Q7: Price elasticity of demand is defined as
Answer
Answer: Percentage change in quantity demanded due to percentage change in price
Q8: Price leadership refers to
Answer
Answer: A form of price collusion
Q9: Pure monopoly may be based on
Answer
Answer: all of these—(a) increasing returns to scale
(b) control over the supply of raw materials
(c) patent or government franchise
Q10: Short run in production function refers to ‘One factor of production varies keeping all other constant’
Answer
Answer: Wrong – False
Q11: Short run in production function refers to ‘When all factors of production become variable’
Answer
Answer: Wrong – False
Q12: Shut-down point is reached when
Answer
Answer: price covers MC but not AC
Q13: The arger the number of firms and the smaer the degree of product differentiation, the
Answer
Answer: More elastic is the monopolisticaly competitive firm’s demand curve.
Q14: The competitive seers short-run supply curve is
Answer
Answer: that part of its marginal cost curve lying above average variable cost
Q15: The demand curve faced by a perfectly competitive firm is
Answer
Answer: horizontal
Q16: The demand curve faced by a pure monopolist
Answer
Answer: is less eastic than that faced by a single purely competitive firm
Q17: The demand curve facing the pure monopolist is
Answer
Answer: negatively sloped
Q18: The demand curve for a commodity is more elastic
Answer
Answer: all of these—(a) the greater the number of good substitutes available
(b) the greater the proportion of income spent on he commodity
(c) longer the period of time considered
Q19: The demand for most products varies directly with the change in consumer income. Such products are known as
Answer
Answer: Normal goods
Q20: The elasticity of demand is measured by
Answer
Answer: the percentage change in quantity for a given percentage change in price
Q21: The feature of monopolistic competition that drives a firms profit to zero in the long run is
Answer
Answer: free entry
Q22: The horizontal demand curve for a firm is one of the characteristic features of
Answer
Answer: Perfect competition
Q23: The interest paid by a firm to borrow money capital represents an
Answer
Answer: explicit cost
Q24: The intersection of the market demand and supply curves for a commodity determines
Answer
Answer: all of these–(a) the equilibrium price
(b) the equilibrium quantity
(c) the price at which there is neither a surplus nor a shortage of the commodity
Q25: The kinked demand curve is used to rationalize
Answer
Answer: price rigidity
Q26: The LAC curve shows the
Answer
Answer: minimum cost of producing various levels of output when plant size can be varied
Q27: The law of diminishing return begins to operate when the
Answer
Answer: marginal product begins to fall
Q28: The law of diminishing return is
Answer
Answer: Short-run law
Q29: The maximum profit condition for a monopoly firm is
Answer
Answer: Marginal revenue is equal to marginal cost
Q30: The MC schedule is obtained by subtracting successive values of
Answer
Answer: Either TC or TVC
Q31: The monopolistic competitor in the short run
Answer
Answer: incurs a loss
Q32: The monopolistic firms demand curve
Answer
Answer: is less eastic than a purely competitive firms demand curve.
Q33: The monopolisticaly competitive seer maximizes profits by producing at the point where
Answer
Answer: marginal revenue equas marginal cost
Q34: The monopolisticaly competitive seers demand curve will tend to become more elastic, the
Answer
Answer: larger the number of competitors
Q35: The nature and shape of AFC is
Answer
Answer: A rectangular Hyperbola
Q36: The term “collusion” refers to
Answer
Answer: A situation in which all firms in an industry decide the price and output
Q37: The term “differentiated product” denotes
Answer
Answer: Same product used in different applications
Q38: The use of highly structured meeting agenda and restricted discussion or interpersonal communication during the decision making process is known as –
Answer
Answer: Nominal Group Technique,
Q39: The wage that an entrepreneur would earn if he worked instead as a manager for someone else in best alternative employment represents
Answer
Answer: implicit cost
Q40: This pricing strategy acts as a barrier to entry to new firms
Answer
Answer: Limit Pricing
Q41: To maximise sales revenue a firm should produce where
Answer
Answer: Marginal revenue is zero
Q42: Total revenue will increase if
Answer
Answer: Demand is inelastic
Q43: Total variable costs remain constant as the output increases
Answer
Answer: Wrong – False
Q44: Transfer payments refer to payments which are made
Answer
Answer: without any exchange of goods and services
Q45: Under which of the following market structures will equilibrium price be equal to marginal cost
Answer
Answer: pure competition
Q46: Variation in Data occurring due to regularly recurring fluctuations in economic activity during each year is
Answer
Answer: Seasonal Variations
Q47: When average product is highest
Answer
Answer: Marginal product is maximum (Note: Best Answer Should: Marginal product is equal to average product)
Q48: When income elasticity of demand for an essential commodity is less than unit, an increase in income leads to
Answer
Answer: less than proportionate increase in demand
Q49: When setting its price, an oligopoly
Answer
Answer: is uncertain about its rivas reaction
Q50: When the income elasticity of demand for a good is negative, the good is
Answer
Answer: Inferior good
Q51: When the law of diminishing return begins to operate, the TVC curve begins to
Answer
Answer: rise at an increasing rate
Q52: Which best describes price discrimination
Answer
Answer: Charging different prices for the same products
Q53: Which of the follow is false in a monopolistic competition
Answer
Answer: Identical products
Q54: Which of the following comes under the broad definition for factors of production
Answer
Answer: Capital
Q55: Which of the following curves is called envelope curve
Answer
Answer: Long run average total cost curve
Q56: Which of the following curves resembles supply curve under perfect competition in the short run
Answer
Answer: Marginal cost curve above shut down point
Q57: Which of the following does not likely to lead to the failure collusive oligopoly
Answer
Answer: Rapidly changing technology
Q58: Which of the following goods can be considered substitutes
Answer
Answer: Tea and Coffee
Q59: Which of the following is a fixed cost
Answer
Answer: cost of machinery and cost of plant
Q60: Which of the following is a unique feature of oligopoly
Answer
Answer: product differentiation
Q61: Which of the following is common feature in both a monopolistic competitive market and oligopoly market
Answer
Answer: Product differentiation
Q62: Which of the following is not a feature of perfect competition
Answer
Answer: Low price; (Low price is not an assumption in the perfect competition, all the remaining are the assumptions under perfect competition. So correct answer is “Low Price”)
Q63: Which of the following is not a precondition for price discrimination
Answer
Answer: The commodity involved must be a durable good.
Q64: Which of the following is not a source of market imperfection
Answer
Answer: Forces of supply and demand (Note: Forces of supply and demand are not sources of market imperfection)
Q65: which of the following is true
Answer
Answer: If the marginal cost is greater than the average cost the average cost
Q66: Which of the following statements concerning indifference curves is true
Answer
Answer: An indifference curve is the locus of points representing various combinations of two goods about which the consumer is indifferent
Q67: Which of the following statements is true with regard to price elasticity of demand
Answer
Answer: Elasticity increases as the price decreases
Q68: Which one of the following is not the characteristic of demand
Answer
Answer: Real market place is required
Q69: Which one of the following is not the characteristic of Perfect
Answer
Answer: Buyers do not know the nature of the product being sold and the prices
Q70: The statement is correct – All costs are variable costs in the long run except LMC
Answer
Answer: NOT Correct
Q71: Based on Figure, how many apartment owners would be willing to sell their apartments for $91,000. 
Answer
Answer: One
Q72: In the scenario depicted in Figure, up to ten apartments may be available for sale. Suppose that ten more apartment owners enter the market, for a total of twenty available apartments. These new entrants into the market would be willing to sell their apartments for any price above $90,000. Which of the following statements accurately describes the resulting change in the supply curve.
Question 2: from above question, how many apartment owners would be willing to sell their apartments for $91,000?
Answer
Answer: The supply curve shifts to the right.
Ans-2- Eleven
Q73: The graph shown depicts two possible supply curves for production of handmade rugs. S1 is the initial supply curve, and S2 is the new supply curve after a change has occurred in the market. Which of the following events could have caused this shift. 
Answer
Answer: Several rug makers have left the market, making handmade rugs more scarce.
Q74: Assume that sofas and arm chairs are substitute goods. The graph shown illustrates the demand curve for sofas. Which of the following events could have triggered the shift in demand from D1 to D2, as shown 
Answer
Answer: The price of armchairs decreased
Q75: When the price of cars is $5000, which of the following terms is not an accurate description of the situation 
Answer
Answer: The market is in equilibrium
Q76: Beginning from the price of $5000, which of the following events would be predicted by the theory of market adjustment
Answer
Answer: Some buyers who are willing to pay more will bid the price of cars up
Q77: Now suppose that the local government invests in a new, very efficient fleet of buses. Now, it is easy and affordable to get from one place to another without having your own car. What change in the graph shown above is most likely to result from the new bus service
Answer
Answer: The demand curve shifts to the left
Q78: The statement is correct – TFC is inverse “S” Shaped reflecting Laws of Returns
Answer
Answer: NOT Correct
Q79: The statement is correct – Over a very long range of Operation, AFC is Zero
Answer
Answer: NOT Correct
