Revenue and Equilibrium

Producer's equilibrium is a situation of 'revenue maximisation'

• True

• False

If the price is less than the average costs but higher than the average variable costs:

• The firm is making a loss and will shutdown in the short term

• The firm is making a profit

• The firm is making a loss but will continue to produce in the short term

• The firm is making a loss and is making a negative contribution to fixed costs

If the marginal revenue is less than the marginal cost then to profit maximize a firm should:

• Increase costs

• Leave output where it is

• Increase output

• Reduce output

Under perfect competition, for the producer to be in equilibrium:

• AR=MR=AC, and AC must be rising

• AR=MR=MC and MC must be falling

• AR=MR=MC and MC must be rising

• AR=MR=TC and TC must be rising

The following table shows the total cost schedule of a competitive firm. It is given that the price of a good is Rs.10. Calculate the profit at each output level. Find the profit maximising level of output.

• 12

• 8

• 5

• 10

Equality between MR and MC is a sufficient condition for profit maximisation.

• True

• False

Gross Profit is the difference between total revenue and total cost.

• True

• False

Can a firm quit the industry in short-run?

• Yes

• No

• No such thing as short-run.

• It is a necessity to quit in the short-run.

What is meant by Producer's Equilibrium?

• Losses are maximised

• Marginal utility is minimised

• Cost is maximised

• Profits are maximised

Choose the options that determine the relationship between MR and TR.

• When MR is 0, TR at the highest point.

• When MR is positive, TR increases.

• MR is zero when TR is decreasing.

• TR is zero when MR is at the highest point.

• TR is decreasing when MR is negative.