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Sampurna 2.0 December-2023

Price Determination in Different Markets DPP-1

1. The basic behavioral principle which apply to all 4. The change in the total revenue that results from a
market conditions - one unit change in sales is -
(1) A firm should produce only if its TR ≥ TVC (1)
(2) A firm should produce at a level where its (2) Average Revenue
MC = MR (3) Marginal Revenue
(3) MC curve cuts the MR curve from below (4) Both (3) and (4)
(4) All the above
5. If MR < 0, then the TR will be -
2. Total revenue can be found out by – (1) rising (2) highest
(1) AR × q (3) falling (4) zero
TR
(2)
q 6. The revenue per unit of one commodity sold is
AR called as -
(3) (1) Total Revenue
q
(2) Marginal Revenue
TR
(4) (3) Average Revenue
q
(4) None of the above

3. When marginal revenue is zero, total revenue will

7. can be AR found out by the formula
be -
TR
(1) lowest (1) TRn - TRn - 1 (2)
q
(2) highest
(3) negative TR
(3) MR × q (4)
(4) zero q
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Answer Key
1. (4) 5. (3)
2. (1) 6. (3)
3. (2) 7. (4)
4. (3)

Hints & Solutions
1. (4) 4.
The correct answer is All the above.
The basic behavioral principle which apply to
all market conditions are A firm should
produce only if its TR ≥ TVC, A firm should
produce at a level where its MC = MR and
MC curve cuts the MR curve from below.
2. (1)
The correct answer is AR × q. 5.
This is because Total Revenue(TR) may be
defined as the total amount of money realized
by the firm from the sale of its total output.
TR = Price per unit × Quantity
Average Revenue(AR) is the same thing as
price. Price and AR are used interchangeably.
3. (2) 6.
The correct answer is highest.
This is because of the law of variable
proportion which states that as we combine
more of a variable factor on a fixed factor,
initially MP will rise but with the rise in
production a stage must come when MP starts
falling becomes zero and negative. This also
indicates a relationship between TP and MP,
7.
MP is derived from TP i.e., MPn = TPn- TPn
- 1, Which indicates that when TP rises at an
increasing rate MP also rises. When TP
increases at a diminishing rate, MP falls, and
when TP is maximum, MP is 0. When TP
falls, MP is negative.
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(3)
The correct answer is Marginal Revenue.
This is because marginal revenue refers to
change in total revenue when one more unit
of a commodity is sold. MRn = TRn - TRn-1
Therefore, The change in the total revenue
that results from a one unit change in sales is
Marginal Revenue.
(3)
The correct answer is falling.
This is because of the relationship between
TR and MR i.e., when TR decreases MR gets
negative.
Therefore, If MR < 0, then the TR will be
falling.
(3)
The correct answer is Average Revenue.
This is because AR refers to revenue per unit
of output. AR = P i.e. Average revenue is
equal to the price of commodities. Average
Revenue(AR) is the same thing as price.
Price and AR are used interchangeably.
(4)
TR
The correct answer is .
q
This is because Average revenue refers to
revenue per unit of output.
i.e., AR = TR/q