If MC is more than MR at a particular level of output, how will the producer react to maximize the profits________________

1

(a)

Decrease Production

(b)

Increase Production

(c)

Increase Revenue

(d)

None of these

When MC is equal to MR, while maximizing profit, then

1

(a)

MC must be rising

(b)

MC must be falling

(c)

MC must be constant

(d)

None of these

What is the relation between price and marginal cost at equilibrium, when price falls with the rise in output.

1

(a)

Price = Marginal Cost

(b)

Price> Marginal Cost

(c)

Price < Marginal cost

(d)

None of these

What is the relation between price and marginal cost at equilibrium, when price remains constant with the rise in output.

1

(a)

Price = Marginal Cost

(b)

Price> Marginal Cost

(c)

Price < Marginal cost

(d)

None of these

A producer is in equilibrium when total cost and total revenue are equal.

1

(a) True

(b) False

If marginal revenue is equal to the total cost, producer is in equilibrium

1

(a) True

(b) False

A firm is in equilibrium if marginal cost curve cuts average revenue curve from below

1

(a) True

(b) False

A firm gets maximum profits only if difference between average revenue and average cost is the maximum

1

(a) True

(b) False

What is meant by profit?

1

(a)

Profit refers to the excess of revenue over cost.

What are the two methods for determination of producer's equilibrium?

1

(a)

(i) TR - TC Approach
(ii) MR - MC Approach

Explain the producer's equilibrium.

1

(a)

A producer is said to be in equilibrium when he produces that level of output at which his profits are maximum. Producer's equilibrium is also known as profit maximisation situation.

Give meaning of producer's equilibrium

1

(a)

A producer is said to be in equilibrium when he produces that level of output at which his profits are maximum . Producer's equilibrium is also known as profit maximisation situation.

What is the general profit maximising condition for a producer (MRand MC approach)?

1

(a)

(i) MC = MR; and
(ii) MC curve cuts the MR curve from below (i.e., MC is rising).

If MC is more than MR at a particular level of output, how will a producer react to maximise the profit?

1

(a)

The Producer will reduce the production to maximise the profit.
Value: Analytic

Suppose a firm is producing a level of output such that MR > MC. What should the firm do to maximise the profit?

1

(a)

MR = MC is the condition for maximum profit. In the given question MR> MC, thus the firm has the capacity to increase production so as to earn maximum profit. So the firm increases its production.
Value: Analytic

Comment on the following statement: "Firms should maximize the difference between marginal revenue and marginal cost."

1

(a)

The statement is false. Firms should maximize profit which is the difference between total revenue and total cost. At the profit-maximizing level of output, marginal revenue is equal to marginal cost.
Value: Analytic