Economics MCQ Questions and Solutions with Explanations | Commerce

Normal profit is called normal because It is minimum acceptable to the producer. Normal profit is a situation where a firm makes sufficient revenue to cover its total costs and remain competitive in an industry.

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.

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

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.

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.

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

The supply of a commodity refers to amount of the commodity offered for sale at a particular price per unit of time. Price of a commodity is determined by the demand for and supply of a commodity.

Economic rent can accrue to any of the factors of production. Economic rent is any payment to an owner or factor of production in excess of the costs needed to bring that factor into production.

Under perfect competition AR=MR. If the market price is unaffected by variations in the firm's output, then the firm's demand curve, its AR curve and MR curve will coincide in the same horizontal line.

When supply of a commodity increases without change in price, it is called rise in supply.