In a perfectly competitive market, a firm in the long run operates at the level of output where:

In a perfectly competitive market, a firm in the long run operates at the level of output where :

A

AC = MC when MC is lowest

B

MC = AR = MR when MC is lowest

C

MR = MC

D

AR = MR =AC = MC

Assertion (A): Long run equilibrium of the industry in a perfectly competitive market occurs at the point where price equals minimum long run average cost.
Reason (R): In this position of zero economic profit, there is no tendency on the part of any existing firm to stage an exit, and no potential entrant wants to enter the industry.

A

Both A and R are individually true and R is the correct explanation of A

B

Both A and R are individually true, but R is not the correct explanation of A

C

A is true, but R is false

D

A is false, but R is true

In case of short-run equilibrium, a perfectly competitive firm while earning abnormal profits operates at an output level where:

A

Marginal cost is the minimum

B

Average cost is the minimum

C

Both marginal cost and average cost are equal

D

Marginal cost is higher than average cost

. . . . . . . . is an individual firm which takes the market wage rate as given, just as the firm in a perfectly competitive product market takes the price for its output as given.

A

Wage differential

B

Wage takes

C

Both A and B

D

Neither A nor B

Assertion (A) A perfectly competitive firm is not a market but is a price taker.
Reason (R) The firm is intereshed in deciding the level of output only.

A

Both (A) and (R) are true

B

Both (A) and (R) are false

C

(A) is false, but (R) is true

D

(A) is true, but (R) is not a correct explanation of (A)

Indicate the correct answer from the following types of the long run average cost curves on which the minimum average cost of production in long run can be determined.
1. Long run average cost curve under normal production function
2. Long run average cost curve under linearly homogeneous production function
3. Planning curve
4. Envelope curve

A

1, 2 and 3

B

2, 3 and 4

C

1, 3 and 4

D

Both 2 and 4

A perfectly competitive firm should reduce output or shut down in the short run if market price is equal to marginal cost, and the price is

A

Greater than average total cost

B

Less than average total cost

C

Greater than average variable cost

D

Less than average variable cost

If the market price is above the perfectly competitive firm's average total cost curve, we expect that in the long run,

A

the industry contracts as firms exit the market.

B

the industry expands as firms exit the market.

C

the industry contracts as firms enter the market.

D

the industry expands as firms enter the market.

The question given below consists of a statement, followed by three arguments I, II and III. You have to decide which of the arguments is/are ‘strong’ arguments is/are ‘weak’ arguments and accordingly choose your answer from the alternatives given below each question. Statement: The domestic equity market has become supervolatile and converted the psychology of every market participant into fear. Greed and fear continue to alternate in the market, like the two sides of a coin. To a seasoned player, there seems to be nothing new as such instances of panic-selling often occur time and again. Why? Arguments: I. Since demonetisation, herd mentality had jacked up financials, banks and NBFC stocks to great heights on the pretext of financial inclusion and formalisation of the economy. This caused the financials gain disproportionate share in Nifty50 at 35 per cent of the free float market capitalisation, which was unheard of in the past. II. The domestic market seems to be deeply oversold and can rebound on any good news. The Nifty50 has taken long-term support at the three-year trend line, which makes a case for the correction to near its end. III. Investors, therefore, should not panic and sell off shares. Instead they should do the reverse and gather the courage to pump in more money into the market by picking quality stocks or investing in ETFs for more stable returns.

A

None is strong.

B

Only I and III are strong.

C

Only II and III are strong.

D

Only I is strong.

E

All are strong.

If a firm operates in a perfectly competitive market, then it will most likely

A

advertise its product on television

B

have difficult time obtaining information about the market price

C

settle for whatever price is offered

D

have an easy time keeping other firms out of the market

In a perfectly competitive market, a firm in the long run operates at the level of output where:

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