What is the shape of the demand curve faced by a firm under perfect competition?

1

(a)

Horizontal

(b)

Vertical

(c)

Positively sloped

(d)

Negatively sloped

Under perfect competition a firm is_______________.

1

(a)

price maker and not price taker

(b)

price taker and not price maker

(c)

neither price maker nor price taker

(d)

None of these

For a price-taking firm

1

(a)

marginal revenue is less than price

(b)

marginal revenue is equal to price

(c)

marginal revenue is greater than price

(d)

the relationship between marginal revenue and price is indeterminate

Suppose that a sole proprietorship is earning total revenues of  Rs.1,00,000 and is incurring explicit costs of Rs.75,000. If the owner could work for another company for Rs.30,000 a year, we would conclude that__________________.

1

(a)

the firm is incurring an economic loss.

(b)

implicit costs are Rs.25,000

(c)

the total economic costs are Rs.1,00,000

(d)

the individual is earning an economic profit of Rs.25,000

The term 'market'refers to a______________.

1

(a)

place where buyer and seller bargain a product or service for a price

(b)

place where buyer does not bargain

(c)

place where seller does not bargain

(d)

None of these

In perfect competition, a firm independently determines price.

1

(a) True

(b) False

In perfect competition every firm of the industry is price maker

1

(a) True

(b) False

Under perfect competition, all the units of a good produced can be heterogeneous.

1

(a) True

(b) False

The condition for shutdown point is, the price is equal to minimum of short-run average cost.

1

(a) True

(b) False

In perfect competition, selling costs can help in raising sale of the product.

1

(a) True

(b) False

Define market for a good.

1

(a)

Market refers to a region where buyers and sellers of a commodity come in contact with each other to effect the transactions of purchase and sale of the commodity.

What do you mean by homogenous product?

1

(a)

Products sold in the market are homogeneous, i.e., they are identical in all respects like quality, colour, size, weight, design, etc.

If the firms are earning abnormal profits how will the 'number of firms in industry' change?

1

(a)

The number of firms in the industry will increase.

What is meant by the term 'price-taker' in the context of a firm?

1

(a)

A firm is said to be a price-taker if it has to accept the price, as determined by the market forces of demand and supply.

What is the relationship between a Ans. perfectly competitive firm's marginal cost curve and its short-run supply curve?

1

(a)

The marginal cost curve of a perfectly competitive firm is the firm's short-run supply curve at the point where price is equal to or greater than average variable cost. To determine its quantity supplied the firm equates the price of its product with its marginal cost.
value: Analytic

What is the relation between market price and average revenue of a price taking firm (i.e. perfectly competitive firm)?

4

(a)

Explain feature of homogeneous product.

4

(a)

Explain the implication of homogeneous product.

4

(a)

What is the relationship between TR, AR and MR under perfect competition?

4

(a)

What is a competitive market? Briefly describe a type of market that is not perfectly competitive

4

(a)

Explain the implications of large number of sellers in a perfectly competitive market.

5

(a)

Explain the short run supply curve of the firm.

5

(a)

'Supply curve is the rising portion of marginal cost curve over and above the minimum of Average Variable cost curve'. Do you agree? Support your answer with valid reason.

5

(a)