Economics - Study Mode

[#661] Supply curve is
Correct Answer

(B) Flatter in long run

Explanation

Solution: Supply curve is Flatter in long run. All firms have identical cost conditions. Hence, in the case of a constant cost industry, the long-run supply curve LSC is a horizontal straight line (i.e., perfectly elastic) at the price OP, which is equal to the minimum average cost. This means that whatever the output supplied, the price would remain the same.

[#662] A vertical supply curve parallel to the price axis implies that the elasticity of supply is
Correct Answer

(A) Zero

Explanation

Solution: A vertical supply curve parallel to the price axis implies that the elasticity of supply is Zero.

[#663] With which of the theories of wages, is the name of John Stuart Mill associated?
Correct Answer

(B) Wages-fund theory

Explanation

Solution: With Wages-fund theory, the name of John Stuart Mill associated. Mill said that wages mainly depend upon demand for and supply of labour or the proportion between population and capital available.

[#664] If a firm shuts down temporarily, it will incur loss equal to
Correct Answer

(C) TFC

Explanation

Solution: If a firm shuts down temporarily, it will incur loss equal to TFC. The intersection of the average variable cost curve and the marginal cost curve, which shows the price where the firm would lack enough revenue to cover its variable costs, is called the shutdown point. If the perfectly competitive firm can charge a price above the shutdown point, then the firm is at least covering its average variable costs. It is also making enough revenue to cover at least a portion of fixed costs, so it should limp ahead even if it is making losses in the short run, since at least those losses will be smaller than if the firm shuts down immediately and incurs a loss equal to total fixed costs.

[#665] During a particular year, farmers experienced a dry weather. If all the other factors remain constant, farmers supply curve for wheat will shift
Correct Answer

(B) Leftward

Explanation

Solution: During a particular year, farmers experienced a dry weather. If all the other factors remain constant, farmers supply curve for wheat will shift Leftward.