In the short run to stay in business, must cover:
1.
Total
costs
2.
Fixed
cost
3.
Variable cost
4.
Normal
profit
There are three types of period such long-run, short-run and very
short-run. Very short run also
called day to day market and this indicates very short time period in which
total supply of market cannot be increase or decrease this is apply on
freshable goods such as vegetables market and fish market, e.g. if price of a
fishes increases than we cannot increase the supply at this time.
In short, factors of production namely land, labor, capital, and
organization, and one factor will be fixed we cannot change this factor. In
short run, if we want to increase supply so we cannot build new firms and
factories and just increase labor or double shift etc.
Fixed cost means those expenditures which are must be bear by firm
also in a closed business. For example, a man takes a shop on a rent but cannot
put purchasing items in it but he must pay its rent, electric bill and
telephone bill.
Variables cost means those expenditures which are bear in running
business. This cost increase due to increase in business growth and vice versa and
cost very over time.
Which one has negative income effect?
1.
Normal
goods
2.
Superior
goods
3.
Inferior goods
4.
Merit
goods
In income effect, suppose the income of a teacher is 20000, within
its income he purchases goods for home like vegetables. If income increase from
20000 to 30000, than he purchases chichkn. This statement indicates that due to
increase in income, demand for vegetables decrease it is called inferior goods.
Inferior goods are different for different class families.
When price of a good is held above equilibrium price, normal result
will be?
1.
Excess-demand
2.
Increase-in-demand
3.
Increase-in-supply
4.
Surplus of product
The equilibrium price is where demand and supply are equal. Demand and
supply are cut each other at this point. Demand and price are inversely related.
When price of a product is increase, than demand decrease due to this
situation, product in a market goes in to surplus.
Economic rent represents excess payment to a factor of production
over and above its:
1.
Transfer
payments
2.
Transfer
costs
3.
Transfer earnings
4.
Variable
costs
Economic rent: “Economic rent is the extra money or payment made over and
above the amount expected by its owner”. A worker may-be ready to work for 20 dollar per-hour,
but because they belong to a union, they receive 24 dollar per hour for the
same job. The above 4 dollar is the economic rent
of worker.
Transfer payment are those payments for which no hard work or struggle
is required like subsidies, scholarship etc.
Transfer earrings are minimum reward of any factor of production on
which this factor is agree to work. A worker
may-be ready to work for 20 dollar per-hour. 20 dollar is transfer earning of a
worker.
Demand for product of individual firm in perfect
competition is:
1.
Fairly
elastic
2.
Unitary
elastic
3.
Perfectly elastic
4.
Fairly
inelastic
Perfect competition does-not exist
in real world. There is large number of buyers and sellers and goods are similar
(homogeneous). In perfect combination, firms are price taker. There is no barrier
on entry and exist of firms. Buyers have complete knowledge of products.
Perfectly elastic means due to little
change in price there is higher change in demand and supply.
Revaluation of exchange rate must
result in an improvement in countries
1.
Terms
of trade
2.
Balance
of trade
3.
Balance of payments
4.
Capital
account
Revaluation is rise and fall in a
currency rate.
Balance of trade: trade of visible goods
(we can see and touch these things)
Balance of payment: visible goods +
invisible goods (services)
In the long run balance of payment
must be balance for example, monthly a person purchase goods from a shop then a
person should clear these payments at the end of the year.
Total revenue of firm under
imperfect competition will be at maximum when,
1.
MC=MR
2.
Average
cost is lower
3.
MR is zero
4.
MC=MR
The raise in
revenue as results of the sale of one extra output unit is called marginal revenue (MR).
The condition of Maximum
employment of worker is fulfill at that point where the MR is zero and total
revenue is highest.
Which of the following
forms largest part of money supply in Pakistan?
1.
Coins and notes
2.
Bank
deposits
3.
Treasury
bills
4.
Gold
Money supply is circulation of money
from one person to another person
International trade might eventually
cease if there is
1.
Perfect mobility of labor
2.
High
transport costs
3.
Same
tax rate in all countries
4.
Free
flouting exchange rate
Cease mean “come to end”
No restriction on labor and it move from one
country to another country freely.