Chapter 4
THE THEORY OF THE FIRM UNDER PERFECT COMPETITION
1. Who makes up a market?
(a) The buyer and the listener
(b) The seller and the listener
(c) The buyer and the seller
Answer: (c) The buyer and the seller
2. Who produces goods of equal quality in the market?
(a) All buyers in the market
(b) All sellers in the market
(c) All businesses in the market
Answer: (c)All businesses in the market
3. Who are the individual price takers in the market?
(a) Buyer
(b) Buyers and sellers
(c) Sellers
Answer: (b)Buyers and sellers
4. When a business accepts a price, it believes that if the price of the item is higher than the market price -
(a) Be able to sell
(b) shall not be able to sell
(c) None of the above
Answer: (b)Will not be able to sell
5. What happens if the fixed price is equal to the market price and how many units of the product are sold?
(a) You can
(b) You cannot
(c) shall be required
Answer: (a)You can
6.What does price acceptance encompass from the customer's perspective?
(a) Want to buy the product at a higher price
(b) wants to buy the product at a lower price
(c) You don't want to do any of the above
Answer: (b)wants to buy the product at a lower price
7.What do firms do if the buyer wants to pay less than the market price?
(a) They want to give the goods away
(b) Does not want to sell
(c) Wants to sell
Answer: (b)Does not want to sell
8.What do firms do with the goods if the consumer wants to pay equal to the market price?n
(a) He wants to give
(b) He does not want to give
(c) Do not give
Answer: (a)Wants to give
9. When will a business lose all the buyers in the market?
(a) Reduced the price of goods below the market price
(b) Increased the price of goods above the market price
(c) None of the above
Answer: (b)The price of goods is increased above the market price
10.What can a firm do with as many units of will as the goods at a lower price than the price determined in the market?
(a) May sell
(b) Cannot be sold
(c) Not to be sold
Answer: (a)You can sell it
11. What should a firm do with the market price if it wants to sell the product?
(a) You have to do more
(b) Must be made equal to or less
(c) Not to be sold
Answer: (b)must be equal to or less
12. If market price (p) is output (q) and sales revenue (TR) is-
(a) TR=p × r
(b) TP=p × q
(c) TP=q × r
Answer: (b)TP=p × q
13. If TR=total sales revenue, then if nothing is produced TR=?
(a) 100
(b) 0
(c) 70
Answer: (b)
14. What is the equation TR= p × q?
(a) The equation of right angles
(b) The equation of a right angle
(c) Straight line equation
Answer: (c)Straight line equations
15. If the output of a business is q and the market price is p, then what is TR, p × q?
(a) More
(b) Less
(c) Equal
Answer: (c)Equal
16. What must price be greater than average variable cost in the short run?
(a) Less
(b) More
(c) greater than or equal to
Answer: (c)more or equal
17.What must price exceed average cost in the long run?
(a) Equal
(b) More
(c) Equal or greater
Answer: (c)Equal to or greater
18. What is the income that the business can cover?
(a) Normal profit
(b) Abnormal gains
(c) Income
Answer: (a)Normal gain
19. What is it called when a business makes more than its normal profit?
(a) Normal gains
(b) Abnormal gains
(c) Income
Answer: (b)Abnormal gains
20. What is the reward of the second best deed?
(a) Expenditure
(b) Income
(c) Opportunity costs
Answer: (c)opportunity cost
