16. The horizontal demand curve parallel to x-axis implies that the elasticity of demand is –

A. Zero

B. Infinite

C. Equal to one

D. Greater than zero but less than infinity

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Correct Answer is B

17. An individual demand curve slopes downward to the right because of the –

A. Working of the law of diminishing the marginal utility

B. The substitution effect of a decrease in price

C. Income effect of fall in Price

D. All of the above

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Correct Answer is D

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18. The economist’s objections to monopoly rest on which of the following grounds?

A. There is a transfer of income from consumers to the monopolist

B. There is welfare loss as resources tend to be misallocated under monopoly

C. Only A is correct

D. Both A and B are correct

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Correct Answer is D

19. In which of the following market structure is the degree of control over the price of its product by a firm very large?

A. Imperfect competition

B. Perfect competition

C. Monopoly

D. A and B both

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Correct Answer is C

20. In the short run, when the output of a firm increases, its average fixed cost –

A. Remains constant

B. Decreases

C. Increases

D. First decreases and then rises

Click for Answer/Explanation

Correct Answer is B

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