# Free Non-Competitive Markets 02 Practice Test - 11th Grade - Commerce

The demand schedule for a firm is shown below

Price (Rs)Quantity71006200530044003500

What is the maximum revenue for the firm?

A.

700

B.

1200

C.

1500

D.

1600

#### SOLUTION

Solution : D

Let us add the total revenue column using the relation TR=P×Q

Price (Rs)QuantityTR710070062001200530015004400160035001500

We can see that maximum revenue of the firm is Rs 1600.

As a monopolist increases the price of a good, what happens to the total revenue (TR)?

A.

TR increases

B.

TR decreases

C.

TR first increases and then decreases

D.

TR first decreases and then increases

#### SOLUTION

Solution : C

As the price increases, TR first increases due to price effect and then decreases due to quantity effect.

When the total revenue is maximum, the marginal revenue is ___

#### SOLUTION

Solution :

When the total revenue is maximum, the marginal revenue is zero.

Choose the correct option(s).

A.

TR decreases when MR is positive

B.

TR increases when MR is positive

C.

TR is maximum when MR is zero.

D.

TR is minimum when MR is zero.

#### SOLUTION

Solution : B and C

MR curve is the slope of the TR curve. TR increases when MR is positive and decreases when MR is negative.

For a monopoly firm, which of the following is equal to market price?

A.

MR

B.

AR

C.

TR

D.

MC

#### SOLUTION

Solution : B

For a monopoly firm,

TR=P×QAR=TRQ=P×QQ=P

The AR curve of a monopoly firm is the same as the _____.

A.

market demand curve

B.

supply curve

C.

MR curve

D.

TR curve

#### SOLUTION

Solution : A

The AR curve of a monopoly firm is the same as the market demand curve because AR is always equal to the price.

Which of the following is the slope of the TR curve?

A.

MR

B.

AR

C.

MC

D.

Price

#### SOLUTION

Solution : A

The slope of the TR curve is MR or marginal revenue.

Study the following demand schedule and answer the following question.

Price (Rs)Quantity11010100920083007400650056004700

At what price is the MR zero?

A.

Rs 8

B.

Rs 7

C.

Rs 6

D.

Rs 5

#### SOLUTION

Solution : D

Let's add the TR and MR columns to the table where
TR=P×Q;&MR=ΔTRΔq

P (Rs)QTR (Rs)MR (Rs)110010100100010920018008830024006740028004650030002560030000470028002

It can be seen that MR is maximum at a price of Rs 5.

For a monopoly firm, MR = 50 -5q. At what output level is the TR maximum?

A.

5

B.

10

C.

20

D.

50

#### SOLUTION

Solution : B

TR is maximum at the output level where the MR is zero.

505q=05q=50q=10

TR is maximized at an output level of 10.

The slope of the MR curve of a monopoly firm is 6. Then the slope of the demand curve is ___

#### SOLUTION

Solution :

The MR curve is twice as steep as the demand curve. Hence, the slope of the demand curve would be half of that of the MR curve i.e 3.