Chapter MCQ Test 2 — Producer's Equilibrium
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
A firm finds that producing the 6th unit adds ₹12 to revenue and ₹9 to cost. It should:
Produce the 6th unit (MR > MC raises profit)
Not produce it
Shut down
Cut to 3 units
Explanation: Since MR (12) exceeds MC (9), the extra unit adds ₹3 to profit, so it is worth producing.
Question 2 of 10
At the 7th unit MR = ₹8 and MC = ₹10. The firm should:
Not produce the 7th unit (MR < MC)
Produce it
Produce two more
Raise its fixed cost
Explanation: MR (8) is below MC (10), so the 7th unit would reduce profit — the firm stops earlier.
Question 3 of 10
Combining the previous two, the firm's equilibrium output is most likely:
6 units (last unit with MR ≥ MC, then MR < MC)
7 units
3 units
10 units
Explanation: It expands while MR > MC (up to the 6th) and stops before the 7th, where MR < MC — equilibrium near MR = MC.
Question 4 of 10
MR = MC occurs at two outputs of a firm. Profit is maximised at the one where MC is:
Rising
Falling
Zero
Negative
Explanation: Only where MC is rising (cuts MR from below) is profit a maximum; at the falling-MC crossing, more output still adds profit.
Question 5 of 10
Using a TR–TC table, a manager sees profit values 2, 5, 5, 3 at outputs 1-4. Equilibrium output is:
2 or 3 (where profit ₹5 is maximum)
1
4
5
Explanation: Profit peaks at ₹5, reached at outputs 2 and 3, so equilibrium is at that maximum-profit level.
Question 6 of 10
Why do the TR–TC and MR–MC approaches always agree?
Maximising the TR−TC gap is the same as setting marginal revenue equal to marginal cost
They use different data
One ignores cost
They never agree
Explanation: The profit gap is widest exactly where the extra revenue of a unit equals its extra cost — i.e. MR = MC.
Question 7 of 10
A firm currently makes a loss of ₹2 at 1 unit but ₹8 profit at 3 units. Moving from 1 to 3 units is wise because along the way:
MR exceeded MC, adding to profit each step
Costs were ignored
Price was fixed at zero
MR was negative
Explanation: Each extra unit added more revenue than cost (MR > MC), turning a loss into a healthy profit.
Question 8 of 10
At producer's equilibrium, producing one more unit would:
Reduce (or not raise) total profit
Always raise profit
Have no cost
Double revenue
Explanation: Beyond equilibrium MR < MC, so an extra unit lowers profit — which is why the firm stops there.
Question 9 of 10
Profit equals TR − TC, so a firm with TR = ₹40 and TC = ₹34 earns:
₹6
₹74
₹40
−₹6
Explanation: Profit = 40 − 34 = ₹6.
Question 10 of 10
The marginal approach is favoured in analysis because it pinpoints the exact unit at which:
Extra revenue just equals extra cost
Fixed cost is zero
Price is highest
Output is unlimited
Explanation: Equilibrium is where the last unit's MR equals its MC, the precise stopping point for profit maximisation.