Which of the following is true of the monopolist?
His average revenue curve is horizontal
He determines both price and output
His demand and marginal revenue curve are the same
He determines either price or output
Correct answer is B
Monopoly refers to a market situation where there is only single seller of a commodity and there are no close substitutes of that commodity. the following are features of a monopolist
1. Single seller:
The producer or seller of the commodity is a single person, firm or an individual and that firm has complete control on the output of the commodity.
2. No Close Substitutes:
All the units of a commodity are similar and there are no substitutes to that commodity.
3. No Entry for New Firms:
Monopoly situation in a market can continue only when other firms do not enter the industry. If new firms enter the industry, there will not be complete control of a firm on the supply. As such, whenever a firm enters the industry, monopoly situation comes to an end. There/art, monopoly industry is essentially one-firm industry. This signifies that under monopoly there is no difference between a firm and an industry.
4. Profit in the Long Run:
A monopolist can earn abnormal profit even in the long run because he has no fear of a competitive seller. In other words, if a monopolist gets abnormal profits in the long run, he cannot be dislodged from this position. However, this is not possible under perfect competition. If abnormal profits are available to a competitive firm, other firms will enter the competition with the result abnormal profits will be eliminated.
5. Losses in the Short Period:Generally, a common man thinks that a monopoly firm cannot incur loss because it can fix any price it wants. However, this understanding is not correct. A monopoly firm can sustain losses equal to fixed cost in the short period. A monopolist means that there is only a single person or a firm to sell the commodity.
6. Nature of Demand Curve:
Under monopoly the demand for the commodity of the firm is less than being perfectly elastic and, therefore, it slopes downwards to the right. The main reason of the demand curve sloping downwards to the right is the complete control of the monopolist on the supply of the commodity. Due to control on the supply a monopolist makes changes in the supply which brings about changes in the price and because of this demand changes in the opposite direction.
7. Price-discrimination:
From the point of view of profit a monopolist can change different prices from different consumers of his commodity. This policy is known as price discrimination. He adopts the policy of price discrimination on various bases such as charging different prices from different consumers or fixing different prices at different places etc.
8. Firm is a Price-Maker:
A competitive firm is a price-taker whereas a monopoly firm is a price-maker. This is because a competitive firm is small compared to market and therefore, it does not have market power. This is not true in the case of a monopoly firm because it has market power. Hence, it is a price maker
9. Average and Marginal Revenue Curves:
Under monopoly, average revenue is greater than marginal revenue. Under monopoly, if the firm wants to increase the sale it can do so only when it reduces its price. This means AR would decline when sale increases. In that case MR would be less than AR. (ii) AR slopes downwards to the right and is greater than MR.
The amount of money that a firm recieves from the sales of its output is called
Total profit
Total revenue
Total cost
Average revenue
Correct answer is B
Total revenue in economics refers to the total receipts/ income from sales of a given quantity of goods or services. It is the total income of a business and is calculated by multiplying the quantity of goods sold by the price of the goods.
Which of the following can be added to a firm's profit to obtain total revenue?
Total variable cost
Total fixed cost
Marginal cost
Total revenue
Correct answer is D
Total Revenue (TR) is calculated by multiplying the quantity of goods sold (Q) by the price of the goods (P).
For example, if you sold 120 pens for N2 each: To find your Profit: You will have to subtract the Total Cost (TC) from your Total Revenue(TR).
Recall that we defined a firm's short-run total costs as
Total Cost = TFC + TVC.
Now we can define economic profit as:
Profit = Total Revenue - Total Cost
The specialization of labour enhances production because people
Can concentrate on all goods
Can efficiently produce their own needs
Can save time and produce more
Become experts in all areas of production
Correct answer is D
Division of labour is the separation of tasks in any system so that people can specialize in their various fields of expertise
Division of labour leads to specialization where people can concentrate on task they perform better than others.
When a firm is enjoying internal economies of scale, its?
Total cost of production is increasing
Average fixed cost is rising continuously
Average cost of production decreases as output increases
Average revenue and marginal revenue are decreasing
Correct answer is C
Internal economies of scale are related to the shift in average production costs for a business as it boosts its overall product output and the average cost per unit falls until maximum efficiency is attained. This means that, the overall production cost decreases, while output increases