Chapter MCQ Test 2 — Revenue
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
A wheat farmer in a perfectly competitive market can sell any amount at the going price of ₹20/kg. For him, AR and MR are:
Both ₹20 and constant
Falling steeply
Both zero
Above ₹20
Explanation: As a price taker, his AR = MR = price = ₹20, constant at every quantity.
Question 2 of 10
TR values for 1, 2, 3 units are ₹10, ₹18, ₹24. The MR of the 3rd unit is:
₹6
₹24
₹8
₹2
Explanation: MR₃ = TR₃ − TR₂ = 24 − 18 = ₹6.
Question 3 of 10
Because AR equals price, the firm's AR curve is identical to its:
Demand curve
Cost curve
Supply curve
MC curve
Explanation: AR = price at each quantity, which is exactly what the demand curve shows.
Question 4 of 10
A monopolist's MR is below its AR because, to sell an extra unit, it must:
Lower the price on all units sold
Raise the price
Keep price fixed
Increase fixed cost
Explanation: Cutting the price to sell one more unit reduces revenue on the earlier units too, so MR falls below AR.
Question 5 of 10
As a firm with a downward demand curve keeps increasing sales, TR will eventually:
Reach a maximum (where MR = 0) and then fall
Rise forever
Stay constant
Become negative immediately
Explanation: TR peaks where MR = 0; beyond that MR is negative and TR declines.
Question 6 of 10
If selling more units leaves total revenue unchanged, the marginal revenue of those units is:
Zero
Positive
Negative
Equal to price
Explanation: No change in TR means each extra unit adds nothing — MR = 0.
Question 7 of 10
The horizontal AR = MR line of a competitive firm reflects that the firm is:
Too small to affect the market price
A monopolist
Setting its own price
Facing falling demand
Explanation: Being a tiny price taker, it sells all it wants at the fixed market price.
Question 8 of 10
For a firm under imperfect competition, which is true?
MR < AR at every positive output
MR = AR always
MR > AR
AR is horizontal
Explanation: With a downward demand curve, marginal revenue always lies below average revenue.
Question 9 of 10
A shop earns ₹500 selling 50 pens. Its average revenue (price) per pen is:
₹10
₹50
₹500
₹5
Explanation: AR = TR ÷ Q = 500 ÷ 50 = ₹10, which is the price.
Question 10 of 10
The link MR = 0 at maximum TR becomes important in the next chapter because producers maximise profit by comparing MR with:
Marginal cost (MC)
Fixed cost
Average fixed cost
Total revenue only
Explanation: Profit is maximised where MR = MC, so the revenue side (MR) is matched against the cost side (MC).