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4

If price exceeds AVC but in smaller than AC at the best level of output, the firm is:

A. Making a profit

B. Incurring a loss but should continue to produce in the short-run

C. Incurring a loss and should stop producing immediately

D. Making a normal profit

Correct Answer :

B. Incurring a loss but should continue to produce in the short-run


If price exceeds AVC (greater than AVC i.e. firm covers its AVC) but in smaller than AC (i.e. firm does not covers its AC) at the best level of output, the firm is incurring loss but should continue to produce in the short-run b/c the firm is atleast covering its AVC.}

Related Questions

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4

Marshallian demand function is also known as:

A. Utility demand function

B. Compensated demand function

C. Collective demand function

D. Relative demand function

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4

The relationship between price effect, income effect and substitution effect is:

A. P.E = S.E + I.E

B. S.E = P.E +I.E

C. I.E = P.E +S.E

D. S.E = P.E +2I.E

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4

Who introduced the concept of Elasticity of Demand into economic theory?

A. Alfred Marshal

B. Adam Smith

C. Karl Marx

D. George Stigler

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4

In cournot model, during the process of adjustment, the number of firms:

A. Donot change

B. Change

C. Both a and b

D. None of the above

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4

Increasing returns is not caused by:

A. Specialization of labor

B. Technological advancement

C. Marketing economics

D. Varying factor proportions

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4

In joint-profit maximization cartel, central agency sets the:

A. Output

B. Input

C. Demand

D. Price

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4

The output where TC = TR & AC = AR:

A. Break-even point

B. Load point

C. Shut-down point

D. Revenue cost point

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4

Increasing return to scales can be explained in terms of:

A. Optimal factor proportions

B. Fixed scale of plant

C. External and internal economies

D. Labor productivity

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4

Monopolistic firm can fix:

A. Both price and output

B. Either price or output

C. Neither price nor output

D. None of the above

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4

After reaching the saturation point consumption of additional units of the commodity cause:

A. Total utility to fall and marginal utility to increase

B. Total utility and marginal utility both to increase

C. Total utility to fall and marginal utility to become negative

D. Total utility to become negative and marginal utility to fall

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4

Human wants are:

A. Thousands

B. Few

C. Innumerable

D. Hundreds

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4

A demand schedule is shown as:

A. A function of price alone

B. A result of change in tastes

C. A result of increase in the size of the family

D. None of the above

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4

The competitive equilibrium leads to:

A. The firms producing with excess capacity

B. The firms producing at their minimum costs

C. Firms producing at a cost higher than the minimum

D. Some firms producing under decreasing costs and others under increasing costs

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4

If the commodity is inferior then the Income Effect (I.E) and the Substitution Effect (S.E):

A. Both move together and reinforce each other

B. One moves and the other remains constant

C. Move in the opposite direction and neutralize each other

D. Both remain constant

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4

An economic theory is :

A. An axiom

B. A proposition

C. A hypothesis

D. A tested hypothesis

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4

The name of the system of direct exchange is:

A. Price system

B. Barter system

C. Islamic economic system

D. Socialistic system

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4

When the income of consumer increases then budget line will:

A. Get steeper

B. Shift parallel to right

C. To get flatter

D. To shift upward

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4

Who is the author of Choice of Technique?

A. K.N.Raj

B. Amartiya Sen

C. A.C.Pigou

D. Alfred Marshal

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4

Total costs are:

A. TFC TVC

B. TFC/TVC

C. TVC/TFC

D. TFC +TVC

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4

Under conditions of perfect competition, price in the long-run is equal to:

A. Minimum of average variable cost

B. Minimum of marginal cost

C. Minimum of average fixed cost

D. Minimum of average cost

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4

If in the long run all factor inputs are increased three times and the resulting output is four times as before, it is a case of:

A. Decreasing returns to scale

B. Variable returns to scale

C. Constant returns to scale

D. Increasing returns to scale

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4

The slope of budget line shows the price ratios of:

A. Many goods

B. Few goods

C. Two goods

D. Three goods

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4

If in the long run, output increases in the same proportion as increase in all the input in the given proportion, this is known as:

A. Increasing returns to scale

B. Decreasing returns to scale

C. Constant returns to scale

D. Variable returns to scale

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4

In case the two commodities are complements, cross elasticity will be:

A. Positive

B. Unitary

C. Negative

D. Infinite

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4

A monopolist will fix the equilibrium output of his product where the elasticity of his average revenue curve is:

A. Less than one

B. Equal to one

C. Greater than one

D. Less than one

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4

Perfect competition implies:

A. Differentiated goods

B. Homogeneous goods

C. Advertised goods

D. Distress sale of goods

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4

By reducing the prices of its products below those of its competitors, a perfectly competitive seller:

A. Reduces its revenues

B. Increases its revenues

C. Can sell nothing

D. None of the above

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4

The alternative of profit maximization theory is:

A. Cost maximization

B. Product maximization

C. Revenue maximization

D. None of the above

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4

Elasticity (E) expressed by the term, 1>E>0, is:

A. Perfectly elastic

B. Relatively elastic

C. Unitary elastic

D. Relatively inelastic

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4

All the firms with identical costs under perfect competition well, in the long-run, earn only:

A. Normal profits

B. Abnormal profits

C. Differential profits

D. No profits