Economics

✅ The correct answer is B.
Economic profit is Total revenue minus total cost. Economic profit is the monetary costs and opportunity costs a firm pays and the revenue a firm receives. Economic profit = total revenue – (explicit costs + implicit costs).

✅ The correct answer is C.
The Revealed Preference Theory deduces the inverse price-quantity relationship from observed behavior of the consumer. Revealed preference theory asserts that the best way to measure consumer preferences is to observe their purchasing behavior.

✅ The correct answer is A.
A higher indifference curve shows a higher level of satisfaction. A higher indifference curve will represent a higher level of satisfaction than a lower indifference curve. In other words, the combinations which lie on a higher indifference curve will be preferred to the combinations which lie on a lower indifference curve.

✅ The correct answer is A.
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%.

✅ The correct answer is C.
A firm decides to exit the industry when Price is less than LAC. LAC at the efficient scale of production is thus the minimum average cost.

✅ The correct answer is B.
Marginal utility is equal to average utility at that time when average utility is maximum.

✅ The correct answer is C.
When two goods are perfect substitutes of each other, then MRS is constant. Two commodities are perfect substitutes for each other – In this case, the indifference curve is a straight line, where MRS is constant.

✅ The correct answer is A.
The degree of monopoly power is measured in terms of difference between Marginal cost and the price. In a perfectly competitive market, price equals marginal cost and firms earn an economic profit of zero. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit.

✅ The correct answer is B.
In the context of oligopoly, the kinked demand curve hypothesis is designed to explain Price rigidity. The curve is more elastic above the kink and less elastic below it. This means that the response to a price increase is less than the response to a price decrease.

✅ The correct answer is A.
In Monopoly market structure the degree of control over the price of its product by a firm very large. In a monopoly type of market structure, there is only one seller, so a single firm will control the entire market. It can set any price it wishes since it has all the market power.