Imposition of an output tax on all firms in a competitive industry will result in:

• A) A leftward shift in the market supply curve.
• B) The entry of new firms into the industry.
• C) A downward shift in each firm's marginal cost curve.
• D) A downward shift in each firm's average cost curve.

The supply curve for a competitive firm is:

• A) Its MC curve above the minimum point of the AVC curve.
• B) Its entire MC curve.
• C) The upward-sloping portion of its MC curve.
• D) Its MC curve above the minimum point of the ATC curve.

Price ceilings:

• A) May decrease consumer surplus if demand is sufficiently inelastic.
• B) Always increase consumer surplus.
• C) May decrease consumer surplus if demand is sufficiently elastic.
• D) Always decrease consumer surplus.

The additional revenue from producing one more unit of output is called:

• A) Slope of average revenue
• B) Total revenue
• C) Marginal revenue
• D) Average revenue

A firm maximizes profit by operating at the level of output where:

• A) Average revenue equals average variable cost.
• B) Total cost equals marginal cost.
• C) Average revenue equals average cost.
• D) Marginal revenue equals marginal cost.

Suppose Fauji Fertilizer Company Limited spends Rs. 10000 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis) to produce 10 bags of Urea. If the wage rate is Rs. 100 per hour and the rental cost of capital is Rs. 200 per hour, then slope of the Isocost line will be:

• A) -1/200
• B) -200
• C) -2
• D) - 1/2

Revenue is equal to:

• A) Price times quantity minus marginal cost.
• B) Price times quantity minus total cost.
• C) Price times quantity minus average cost.
• D) Price times quantity.

Assume that a firm spends Rs. 1000 on two inputs, labor (L) graphed on the horizontal axis and capital (K) graphed on the vertical axis. When the wage rate is Rs. 100 per hour and the rental cost of capital is Rs. 200 per hour, the equation of the Isocost line is:

• A) 1000 = 200(L+K)
• B) 1000 = 100L + 200K
• C) 1000 = 200L + 100K
• D) 1000 = 10(100L+200K)

Which of the following is included in economic depreciation to make it equal to the user cost of capital?

• A) Interest Rate - Value of Capital
• B) Interest Rate + Value of Capital
• C) Interest Rate / Value of Capital
• D) Interest Rate * Value of Capital

In a constant-cost industry, price always equals:

• A) LRAC and minimum LRMC.
• B) LRMC and minimum LRAC.
• C) Minimum LRAC, but not LRMC.
• D) LRMC and LRAC, but not necessarily minimum LRAC.

Assume that a firm's production process is experiencing increasing returns to scale over a broad range of outputs. Long run average costs over this range of output will tend to:

• A) Fall to a minimum and then rise.
• B) Remain constant.
• C) Increase.
• D) Decline.

The long-run supply curve of an increasing cost industry is:

• A) Horizontal.
• B) Vertical.
• C) Upward sloping.
• D) Downward sloping.

The ratio of the wage rate to rental cost of capital is called:

• A) Slope of isoquant
• B) Slope of indifference curve
• C) Slope of isocost
• D) Slope of production function

Which of the following is not an example of joint production?

• A) textile industry—garments and shoes
• B) Automobile company--cars and trucks
• C) University--Teaching and research
• D) Chicken farm--poultry and eggs

The producer surplus for a market can be measured as:

• A) Area between the equilibrium price line and the supply curve to the left of equilibrium output.
• B) Vertical intercept of the supply curve.
• C) Area under the demand curve to the left of equilibrium output.
• D) Area under the supply curve to the left of equilibrium output.

A firm in a perfectly competitive market can not affect market price by changing the amount of output because:

• A) The firm supplies a different good than its rivals.
• B) The firm's output is a small fraction of the entire industry's output.
• C) The short run market price is determined solely by the firm's technology.
• D) The market price is determined (through regulation) by the government.

Suppose output of two automobile firms, one is producing cars and other is producing trucks, is less than the output of another automobile firm producing both cars and trucks jointly. We can conclude that the production process involves:

• A) Decreasing returns to scale.
• B) Economies of scope.
• C) Increasing returns to scale.
• D) Economies of scale.

The shape of long-run supply curve of a constant-cost industry is:

• A) Vertical.
• B) Horizontal.
• C) Upward-sloping.
• D) Downward-sloping.

A firm never operates:

• A) On the downward-sloping portion of its ATC curve.
• B) At the minimum of its ATC curve.
• C) At the minimum of its AVC curve.
• D) On the downward-sloping portion of its AVC curve.

Agricultural products are produced in perfectly competitive market because:

• A) All firms are producing perfect substitutes.
• B) Firms are price taker.
• C) There are large producers/firms of agriculture products.
• D) All of the given options are correct.