Question:
The table below shows the total cost and profits for different levels of output sold by a firm in a competitive market: [Output: 20, TC: Rs. 600, Profits: Rs. 600] ; [Output: 30, TC: Rs. 800, Profits: Rs. 700] ; [Output: 40, TC: Rs. 1000, Profits: Rs. 800]. According to this information, when the firm increases its sales from:
(1) 20 units to 30 units, the price falls by Rs. 50.
(2) 20 units to 30 units, the price falls by Rs. 60.
(3) 30 units to 40 units, the price falls by Rs. 40.
(4) 30 units to 40 units, the price falls by Rs. 5.
(5) 20 units to 40 units, the price falls by Rs. 10.
Correct Answer:
(4)
Answer Explanation:
Total Revenue (TR) = Total Cost + Profit. At 30 units, TR = 800+700 = 1500, making the price Rs. 50 (1500/30). At 40 units, TR = 1000+800 = 1800, making the price Rs. 45 (1800/40). Thus, from 30 to 40 units, the price falls by Rs. 5.
Topic: Costs of Production Year: 2023
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