CA Foundation Paper 4

Price Determination MCQ

Chapter 4 • 100 Questions from ICAI Study Material

Questions

100

Est. Time

75 min

Exam Weight

12-15%

Source

ICAI Book

Sample Questions: Price Determination

Preview 8 of 100 MCQs from Chapter 4

1. In the table below what will be equilibrium market price? Price (₹) Demand (tonnes per annum) Supply (tonnes per annum) 1 1000 400 2 900 500 3 800 600 4 700 700 5 600 800 6 500 900 7 400 1000 8 300 1100

A) ₹ 2
B) ₹ 3
C) ₹ 4 ✓
D) ₹ 5

2. Assume that when price is ₹ 20, the quantity demanded is 9 units, and when price is ₹ 19, the quantity demanded is 10 units. Based on this information, what is the marginal revenue resulting from an increase in output from 9 units to 10 units.

A) ₹ 20
B) ₹ 19
C) ₹ 10 ✓
D) ₹ 1

3. Assume that when price is ₹ 20, the quantity demanded is 15 units, and when price is ₹ 18, the quantity demanded is 16 units. Based on this information, what is the marginal revenue resulting from an increase in output from 15 units to 16 units?

A) ₹ 18
B) ₹ 16
C) −₹ 12 ✓
D) ₹ 28

4. Suppose a firm is producing a level of output such that MR > MC, what should be firm do to maximize its profits?

A) The firm should do nothing.
B) The firm should hire less labour.
C) The firm should increase price.
D) The firm should increase output. ✓

5. Marginal Revenue is equal to:

A) The change in price divided by the change in output.
B) The change in quantity divided by the change in price.
C) The change in P x Q due to a one unit change in output. ✓
D) Price, but only if the firm is a price searcher.

6. Suppose that a sole proprietorship is earning total revenues of ₹ 1,00,000 and is incurring explicit costs of ₹ 75,000. If the owner could work for another company for ₹ 30,000 a year, we would conclude that :

A) The firm is incurring an economic loss. ✓
B) Implicit costs are ₹ 25,000.
C) The total economic costs are ₹ 1,00,000.
D) The individual is earning an economic profit of ₹ 25,000.

7. Which of the following is not an essential condition of pure competition?

A) Large number of buyers and sellers
B) Homogeneous product
C) Freedom of entry
D) Absence of transport cost ✓

8. What is the shape of the demand curve faced by a firm under perfect competition?

A) Horizontal ✓
B) Vertical
C) Positively sloped
D) Negatively sloped