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# Test: Price And Output Determination- 1

## 30 Questions MCQ Test Business Economics for CA Foundation | Test: Price And Output Determination- 1

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This mock test of Test: Price And Output Determination- 1 for CA Foundation helps you for every CA Foundation entrance exam. This contains 30 Multiple Choice Questions for CA Foundation Test: Price And Output Determination- 1 (mcq) to study with solutions a complete question bank. The solved questions answers in this Test: Price And Output Determination- 1 quiz give you a good mix of easy questions and tough questions. CA Foundation students definitely take this Test: Price And Output Determination- 1 exercise for a better result in the exam. You can find other Test: Price And Output Determination- 1 extra questions, long questions & short questions for CA Foundation on EduRev as well by searching above.
QUESTION: 1

### Under which Market Situation demand curve is linear and parallel to X-axis:

Solution:

The demand curve under perfect competition is a horizontal linear line parallel to x-axis which means that the price of the commodity remains the same and any amount of quantity can be sold at this prevailing price in the market but a little variation in the price will lead to a fall in demand to zero.

QUESTION: 2

### Kinked demand hypothesis is designed to explain ________ in context of oligopoly.

Solution:

In the context of oligopoly, the kinked demand curve hypothesis is designed to explain Price rigidity. The curve is more elastic above the kink and less elastic below it. This means that the response to a price increase is less than the response to a price decrease.

QUESTION: 3

### The demand curve of the firm and industry will be same in which form of market:

Solution:
QUESTION: 4

OPEC is an example of

Solution:

Historically a prime example of an oligopoly has been the Organization of the Petroleum Exporting Countries (OPEC) where a limited number of countries have dictated oil production and prices to the global economy.

QUESTION: 5

Supernormal profits occur, when:

Solution:

Supernormal profit is also called economic profit, and abnormal profit, and is earned when total revenue is greater than the total costs.

QUESTION: 6

Which of these are characteristics of Perfect competition.

Solution:
QUESTION: 7

A firm will shut down in the short run if:

Solution:

In the short runa firm that is operating at a loss (where the revenue is less that the total cost or the price is less than the unit cost) must decide to operate or temporarily shutdown. The shutdown rule states that “in the short run a firm should continue to operate if price exceeds average variable costs. ”

QUESTION: 8

What are the conditions for the long run equilibrium of the competitive firm?

Solution:

For a firm to achieve long run equilibrium, the marginal cost must be equal to the price and the long run average cost. That is, LMC = LAC = P. The firm adjusts the size of its plant to produce a level of output at which the LAC is minimum.

QUESTION: 9

Competitive firms in the long run earn:

Solution:

In the long run, with the entry of new firms in the industry, the price of the product will go down as a result of the increase in supply of output and also the cost will go up as a result of more intensive competition for factors of production. The firms will continue entering the industry until the price is equal to average cost so that all firms are earning only normal profits.

QUESTION: 10

MR Curve = AR = Demand Curve is a feature of which kind of Market?

Solution:
QUESTION: 11

A competitive firm in the short run incure losses. The firm continue production, if:

Solution:
QUESTION: 12

Under Monopolistic competition the cross elasticity of demand for the product of a single firm would be:

Solution:
QUESTION: 13

A monopolist is able to maximize his profits when :

Solution:

A monopolist is able to maximize its profits by setting the price at the level that will maximize its per-unit profit.setting output at MR = MC and setting price at the demand curve's highest point. producing maximum output where price is equal to its marginal cost.

QUESTION: 14

The MR curve cuts the horizontal line between Y axis and demand curve into:

Solution:
QUESTION: 15

The demand curve of oligopoly is:

Solution:

In an oligopolistic market, the kinked demand curve hypothesis states that the firm faces a demand curve with a kink at the prevailing price level. The curve is more elastic above the kink and less elastic below it. This means that the response to a price increase is less than the response to a price decrease.

QUESTION: 16

In market, the price and output equilibrium is determined on the basis of:

Solution:
QUESTION: 17

If the price of crackers goes up when the price of cheese goes down, crackers and cheese are

Solution:

The correct option is Option D.

If the price of crackers goes up when the price of cheese goes down, crackers and cheese are inferior goods.

QUESTION: 18

“Price Discrimination” can be best exercised by the Seller in ________.

Solution:
QUESTION: 19

Which of the following is not the feature of an imperfect competition?

Solution:
QUESTION: 20

Which one of the following statement is Incorrect?

Solution:
QUESTION: 21

Perfectly competitive firm faces:

Solution:
QUESTION: 22

A firm encounters “shut down” point when ________.

Solution:

A shutdown point is a level of operations at which a company experiences no benefit for continuing operations, and therefore decides to shut down temporarily (or in some cases permanently). It results from the combination of output and price where the company earns just enough revenue to cover its total variable costs. Conventionally stated the shutdown rule is: "in the short run a firm should continue to operate if price exceeds average variable costs." Restated, the rule is that to produce in the short run a firm must earn sufficient revenue to cover its variable costs.

QUESTION: 23

Monopolist can fix price of goods whose elasticity is _________.

Solution:
QUESTION: 24

Price rigidity is a situation found in which of the following market forms?

Solution:
QUESTION: 25

In a perfectly competitive market the demand curve of a firm is:-

Solution:

In a perfectly competitive market individual firms are price takers. The market demand curve slopes downward, while the firm's demand curve is a horizontal line. The firm's horizontal demand curve indicates a price elasticity of demand that is perfectly elastic.

QUESTION: 26

Oligopoly having identical products is known as _______.

Solution:
QUESTION: 27

Which of the following is not a feature of oligopoly market?

Solution:
QUESTION: 28

In monopolistic competition excess capacity in the firm _______.

Solution:

Explanation : The doctrine of excess (or unutilised) capacity is associated with monopolistic competition in the long- run and is defined as “the difference between ideal (optimum) output and the output actually attained in the long-run.”

QUESTION: 29

Monopolistic Competitive firms ______.

Solution:

A monopolistic competitive industry has the following features:

Many firms.

Freedom of entry and exit.

Firms produce differentiated products.

Firms have price inelastic demand; they are price makers because the good is highly differentiated

Firms make normal profits in the long run but could make supernormal profits in the short term

Firms are allocatively and productively inefficient.

QUESTION: 30

In oligopoly, the kink on the demand curve is more due to _________

Solution: