If the perfectly competitive price is currently below minimum average total cost, we can expect which of the following events in the long run?

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

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

The bar graph given below shows the cost price and selling price of 5 articles. Profit amount = Selling price – Cost price Loss amount = Cost price – Selling price Profit percent/Loss percent = [(Profit/Loss)/Cost price] × 100 Which of the following statement(s) is/are not correct? I. If the cost price of A and E gets interchanged, then there will be a loss of 24 percent on E. II. Profit earned on D is 25 percent.

A

Only I

B

Both I and II

C

Neither I nor II

D

Only II

The point on which the average cost is minimum in a firm short-run average cost curve will also be the minimum cost point on the firm's long run average cost curve. This is true

A

When LAC is falling

B

Never

C

Always

D

Only at that level of output when LAC is at its minimum

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.

If the selling price of a refrigerator is 26% more than its cost price and the discount offered on its marked price is 4%, then which of the following is correct? I. The ratio of its selling price to the cost price is 63 ∶ 50 II. The ratio of its cost price to the marked price is 7 ∶ 4 III. The ratio of its marked price to the cost price is 21 ∶ 16

A

I and II

B

II and III

C

I and III

D

All

If the selling price of a wardrobe is 54% more than its cost price and the discount offered on its marked price is 1%, then which of the following is correct? I. The ratio of its cost price to the marked price is 3 ∶ 7 II. The ratio of its cost price to the selling price is 50 ∶ 77 III. The ratio of its marked price to the cost price is 14 ∶ 9

A

Only I

B

I and II

C

I, II, and III

D

II and III

Match List I with List II: List I (Pricing Strategies) List II (Description) (A) Ramsay pricing (I) Setting a high price when a product is first introduced and gradually lowering price as it gains scale (B) Price skimming (II) Firm charges lower price (than the ongoing price) to gain market entry (C) Cost plus pricing (III) Price deviations from marginal cost should be inversely proportional to price elasticity of the product (D) Penetration pricing (IV) It is full cost pricing strategy that also includes mark up for target return, degree of competition, price elasticity and availability of substitutes. Choose the correct answer from the options given below:

A

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

B

(A) - (II), (B) - (I), (C) - (III), (D) - (IV)

C

(A) - (III), (B) - (I), (C) - (IV), (D) - (II)

D

(A) - (I), (B) - (IV), (C) - (II), (D) - (III)

The following question is accompanied by three statements (I), (II), and (III). You have to determine which statements(s) is/are sufficient/necessary to answer the questions. A person can purchase 3 articles in Rs. 50. What is the price of the costliest article? Statement I. The cost price of the two articles each is Rs. 2 less than the cost price of the costliest article. Statement II. The cost price of two articles out of 3 is the same. Statement III. The cost price of the costliest article is 12.5% more than the cost price of the cheapest article.

A

Either statement I and II together or Statement II and III together is sufficient to answer the question.

B

The data in statement I alone or statements II and III together is sufficient to answer the question.

C

The data in statement I and II together are sufficient to answer the question.

D

The data in all the statements I, II, and III are not sufficient to answer the question.

E

The data in all statements I, II, and III together are necessary to answer the question.

Marginal cost is equal to marginal revenue, average cost is equal to average revenue, average revenue is equal to marginal revenue and average cost is equal to marginal cost. This is the condition of
1. long period equilibrium for a firm under monopoly
2. short period equilibrium for a firm under oligopoly
3. long period equilibrium
4. long period equilibrium for a firm under perfect competitions
Select the correct answer

A

Both 1 and 4

B

Both 3 and 4

C

Both 3 and 1

D

Only 1

If the perfectly competitive price is currently below minimum average total cost, we can expect which of the following events in the long run?

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