Economics - Study Mode

[#301] Which form of market structure is characterised by interdependence in decision-making as between the different competing firms?
Correct Answer

(A) Oligopoly

Explanation

Solution: Oligopoly form of market structure is characterised by interdependence in decision-making as between the different competing firms. An oligopoly is a market form wherein a market or industry is dominated by a small number of large sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher prices for consumers. Oligopolies have their own market structure.

[#302] In monopoly and perfect competition, the cost curves are
Correct Answer

(A) Same

Explanation

Solution: In monopoly and perfect competition, the cost curves are same. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit. Perfect competition produces an equilibrium in which the price and quantity of a good is economically efficient.

[#303] If price changes by 1% and supply changes by 2%, then supply is
Correct Answer

(A) Elastic

Explanation

Solution: If price changes by 1% and supply changes by 2%, then supply is Elastic. The Price Elasticity of Supply (PES) for elastic and inelastic supply would be different. The PES for elastic supply would be greater than 1. This tells us that if prices were to increase (or decrease) by 1%, the quantity supplied would increase (or decrease) in a number greater than 1%.

[#304] An ISO-product slopes
Correct Answer

(B) Downward to the right

Explanation

Solution: An ISO-product slopes downward to the right. They slope downward because MTRS of labour for capital diminishes. When we increase labour, we have to decrease capital to produce a given level of output.

[#305] Which of the following is NOT the assumption of the Marginal Productivity Theory of Distribution?
Correct Answer

(C) All factors, except one, are variable

Explanation

Solution: All factors, except one, are variable is NOT the assumption of the Marginal Productivity Theory of Distribution.