CUET Economics Chapter-The Theory of Firm Under Perfect Competition

  • Board
    CBSE
  • Textbook
    NCERT
  • Class
    Class 12
  • Subject
    Economics
  • Chapter
    CUET Economics Chapter-The Theory of Firm Under Perfect Competition
  • Chapter Name
    The Theory of Firm Under Perfect Competition
  • Category
    CUET (Common University Entrance Test) UG

Important MCQ Questions on CUET Economics Chapter-The Theory of Firm Under Perfect Competition with Detailed explanation

HT having an expert teacher of Economics prepared Important MCQ Questions on the CUET Economics Chapter-The Theory of Firm Under Perfect Competition with Detailed explanations. All the Chapters in the syllabus of CUET Economics are covered with coverage of the entire syllabus. This page is prepared for Chapter-The Theory of Firm Under Perfect Competition and covers all important topics of the competitive exam CUET for domain subject test. Check out the chapter-wise CUET Economics MCQ questions. 

MCQ Questions for CUET Economics Chapter-The Theory of Firm Under Perfect Competition Set-1

Macroeconomic Economics - MCQ on The Theory of Firm Under Perfect Competition

Class XII

Q.01. A movement along the supply curve may be caused by

a) change in technology.

b) change in the number of producers.

c) shift in demand.

d) change in costs.

Answer:

c)

Explanation: A change in demand conditions changes the equilibrium price leading to a movement along the supply curve.

Q.02. A subsidy paid to producers

a) will shift the supply curve.

b) will shifts the demand curve.

c) will lead to a contraction in supply.

d) will lead to an extension of supply.

Answer:

a)

Explanation: A subsidy to producers will reduce their costs and shift the supply curve.

Q.03. The price mechanism cannot

a) act as a signal.

b) act as an incentive.

c) act as a rationing device.

d) shift the demand curve.

Answer:

d)

Explanation: The price mechanism is a signal, incentive and rationing device; changes in price leads to a movement along the demand curve not a shift in it.

Q.04. A shift in supply will have a bigger effect on price than output, if demand is

a) income elastic.

b) income inelastic.

c) price elastic.

d) price inelastic.

Answer:

d)

Explanation: A shift in supply will affect the equilibrium price more than the quantity, if demand is steep i.e. price inelastic.

Q.05. If, demand increases in a market, it will usually lead to

a) a higher equilibrium price and output.

b) a lower equilibrium price and higher output.

c) a lower equilibrium price and output.

d) a higher equilibrium price and lower output.

Answer:

a)

Explanation: An outward shift in demand will lead to a higher price and output.

Q.06. A profit-maximizing firm in perfect competition produces to the point, where

a) total revenue is maximized.

b) marginal revenue equals zero.

c) marginal revenue equals marginal cost.

d) marginal revenue equals average cost.

Answer:

c)

Explanation: A profit-maximizing firm in perfect competition produces to the point, where marginal revenue equals marginal cost. (In other words no extra profit can be made).

Q.07. Firms in perfect competition have a

a) perfectly elastic demand curve.

b) perfectly inelastic demand curve.

c) perfectly elastic supply curve.

d) perfectly inelastic supply curve.

Answer:

a)

Explanation: Firms in perfect competition have a perfectly elastic demand curve.

Macroeconomic Economics - MCQ on THE THEORY OF THE FIRM UNDER PERFECT COMPETITION

Class XII

Q.1.Market refers to

I. Buyers and sellers are at different place

II. Buyers and sellers are in contact with each other

III. Purchase and sale of the commodity at different price

IV. Goods are available at a particular place

Answer:

II.Buyers and sellers are in contact with each other

Explanation: Market refers to any effective arrangement by which buyers and sellers are in contact with each other for purchase and sale of the commodity

Q.2.The products, which are identical in all aspects, are called

I. Heterogeneous goods

II. Homogeneous goods

III. Identical goods

IV. Giffen goods

Answer:

II.Homogeneous goods

Explanation: The products, which are identical in quality, shape, size, colour, packing etc., are called homogeneous goods

Q.3.Name market situation in which a commodity sells at a uniform price?

I. Monopoly

II. Imperfect competition

III. Perfect competition

IV. Oligopoly

Answer:

III. Perfect competition

Explanation Perfect competition is a market situation in which there are a large number of buyers and sellers and a commodity sell at a uniform price

Q.4.What is the shape of demand curve of an individual seller in perfect competition

I. Downward

II. Upward

III. Parallel to y-axis

IV. Parallel to x- axis

Answer:

IV. Parallel to x- axis

Explanation The demand curve of an individual seller in perfect competition is straight line (horizontal) parallel to x-axis

Q.5 In which forms price discrimination is possible?

I. Perfect competition

II. Imperfect competition

III. Monopoly

IV. Monopolistic competition

Answer:

III. Monopoly

Explanation Price discrimination means

Q.6 Name a market situation in which a commodity sells at a uniform price

I. Monopoly

II. Monopolistic

III. Perfect competition

IV. Imperfect competition

Answer:

III Perfect competition

Explanation Perfect competition is a market situation in which there are large number of buyers and sellers and a commodity sells at a uniform price

Q.7.What are the characteristics of perfect competition?

I. Large number of buyers and sellers

II. Homogeneous Product

III. Free entry and exit of the firm

IV. All

Answer:

IVAll

Explanation The perfect competition is related to large number of buyers and sellers Same products, entry and exit of the firm is not restricted

Q.8.What is abnormal profit?

I. Revenue over cost

II. Cost over revenue

III. Cost equal to revenue

IV. None

Answer:

I. Revenue over cost

Explanation Abnormal profit means excess of total revenue over total costs.

Q.9.How many firms are there in a monopoly market?

I. One

II. Two

III. Three

IV. Four

Answer:

I. One

Explanation Only one firm is present in monopoly firm

Q.10.The rights to the owners to use technology and no one else can use it?

I. Compulsion

II. Patent

III. Restriction

IV. Subsidy

Answer:

II. Patent

Explanation Patent rights are the rights the holders of which are exclusive owners to use a particular technology or product and no one else can use technology by obtaining license

Q.11.If the firms are earning abnormal profits how will the number of firms in the industry change?

I. The number of firms will decrease

II. The number of firms will increase

III. The number of firm will remain constant

IV. None

Answer:

II. The number of firms will increase

Explanation: If the firms are earning abnormal profit then other will also enter to earn profit

Q.12.Perfect Market the buyers and sellers in the market are

I. Price maker

II. Price Taker

III. No effect

IV. A medium to fluctuate price

Answer:

II. Price Taker

Explanation:The price is fixed by the demand and supply forces

Q.13. How are the total Revenue of a firm is related to market price and the

quantity sold by the firm. ?

I. Total Revenue = Price x output

II. Total Revenue=Output

Price

III. Total Revenue=Output-Price

IV. None

Answer:

III.Total Revenue = Price x output

Explanation: Total Revenue refers to total amount of money received by the firm from the sale of given level of output. It is obtained by multiplying the price per unit of the commodity with the quantity of output sold.

Q.14. Degree of responsiveness of change in quantity supplied due to change in price

I. Price responsiveness

II. Price Elasticity

III. Price discrimination

IV. Price is inelastic

Answer:

II. Price Elasticity

Explanation:It is the degree of responsiveness of change in quantity supplied due to change in price. We can measure the elasticity of supply as given formula-

Es = Change in Quantity supplied x Price

Change in price x Quantity

Q.15.When marginal revenue falls but remains positive total revenue will

I. Increase

II. Decrease

III. Constant

IV. None

Answer:

.I.Increase

Explanation When marginal revenue falls but remains positive total revenue increases

Q.16. Entry and exit of firms is

I. Restricted

II. Free

III. A lot of formalities involved

IV. Not easy

Answer:

IIFree

Explanation: Free entry and exit of firms in the perfect market.

Q.17. Perfect Knowledge and Perfect Mobility is required in

I. Imperfect Competition

II. Perfect Competition

III. Pure Market

IV. Monopoly

Answer:

II.Perfect Competition

Explanation: These are the two feature which are present in perfect market which differs from pure market

Q.18. Maximum profit obtained at a level of output is called

I. Consumer Equilibrium

II. Producer Equilibrium

III. Market Equilibrium

IV. Income Equilibrium

Answer:

II. Producer Equilibrium

Explanation: Producer equilibrium is defined as the maximum profit obtained at a level of output . It is the difference between total revenue ( TR) and total cost (TC) Thus,

Profit = TR-TC

Q.19. The supply curve of a firm represents

I. Level of input that a firm desires to have

II. Level of output that a firm wants to produce

III. Level of output that a firm comes at break even

IV. Level of output is equal to level of input

Answer:

II. Level of output that a firm wants to produce

Explanation The supply curve of a firm represents the level of out put that a firm chooses to produce corresponding to different values of the market.

Q.20. Why supply curve is shift to leftward

I. Improved technology

II. Related goods

III. Rise in the cost of factors of Production

IV. None

Answer:

III.Rise in the cost of factors of Production

Explanation when the cost of factor of production goes up. The cost of production will rise as a result the higher cost of production will supply less factor inputs.

MCQ Questions for CUET Economics Chapter-The Theory of Firm Under Perfect Competition Set-2

Q.21.When the supply of a commodity change due to factors other than price then it is called

I. Change is supply

II. Change in supply of related goods

III. Change in quantity supplied

IV. None

Answer:

I. Change in supply

Explanation The supply rises due to rise in the factors other than price and falls due to the fall of factors other than price

Q.22. There is upward/ down ward shift of supply curve.

I. Change in supply

II. Change in quantity supplied

III. Change in demand

IV. change in quantity demanded

Answer:

II.Change in quantity supplied

Explanation When the supply of Commodity changes due to Change in price only and other factor remain constant

Q.23.The elasticity of supply Es=0

I. Parallel to x-axis

II. Parallel to y-axis

III. Downward sloping

IV. None

Answer:

II. Parallel to y-axis

Explanation The supply line is parallel to y axis. So the elasticity is zero.

Q.24. When demand and supply curve intersect each other it is called?

I. Maximum satisfaction level

II. Minimum satisfaction level

III. Equillibrium level

IV. Safety Level

Answer:

III. Equilibrium level

Explanation Equilibrium price is the price which is determined at the point of equilibrium. Equilibrium is the point where demand and supply of a commodity are equal. In other words, equilibrium price is determined at the point where demand and supply curve intersect each other.

Q.25.What will happen to equilibrium price if there is decrease is supply?

I. Equilibrium price will decrease

II. Equilibrium price will remain constant

III. Equilibrium price will increase

IV. Equilibrium price will change

Answer:

III. Equilibrium price will increase.

Explanation When demand of a commodity remains constant and there is an increase in supply, the equilibrium price will decrease similarly of there is decrease is supply, the equilibrium price will increase.

Q.26.What happens when the situation of perfect competition when price is greater than the equilibrium price

I. The quantity supplied exceeds quantity demanded

II. The quantity demanded exceeds quantity supplied

III. The quantity supplied is equal to quantity demanded

IV. None

Answer:

I.The quantity supplied exceeds quantity demanded

Explanation The quantity supplied exceeds quantity demanded. It is the situation of excess supply. It is due to fall in price by causing competition among the sellers.

Q.27.The number of buyers in perfect Market is?

I. Small

II. Large

III. Medium

IV. None

Answer:

Large

Explanation Perfect competition is a situation in which a market Large no of buyers and sellers are present.It influence the price of the market.

Q.28.In perfect competition AR is always to

I. TR

II. MR

III. Output

IV. Price

Answer:

AR=MR

Explanation AR and MR curves are horizontal parallel to x-axis