Question

1. In the short run, the greater the level of output, the

1. Lower the total variable cost.
2. Greater the total variable cost.
3. Greater the average fixed cost.
4. Lower the total fixed cost.
5. Greater the total fixed cost.

The question below (24) is based on the following demand schedule for a monopolist:

            ______________________________________________________________

               P ($)             Q (units)                      TR ($)              MR ($)

1.                  (2)                       (3) = (2)              (4)

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    160                  1

    150                  2

                140                  3

                130                  4

                120                  5

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Where: P is Price; Q is Quantity; TR is Total Revenue; MR is Marginal Revenue.

1. The marginal revenue associated with the sale of the third unit is:

1. $100.
2. $110
3. $120.
4. $130.
5. $140.

Answer 1

Answer : 1) The answer is option b.

In short run if output level increase then only total variable cost increase. Total fixed cost remain constant in short run. Hence except option b other options are not correct. Therefore, option b is the correct answer.

2) The answer is option c.

TR of 2 units = Price * Quantity = 150 * 2 = $300.

TR of 3 units = 140 * 3 = $420.

MR of 3rd unit = TR of 3 units - TR of 2 units = 420 - 300 = $120.

Hence except option c other options are not correct. Therefore, option c is the correct answer.