CUET UG Booster Economics 4 Test (M2) -

🚀

CUET UG Booster Economics 4 Test (M2)

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Booster Economics 4 Test (M2)

1 / 20

QUESTION 1 OF 20

In perfect competition, how do we conceptualize the Total Revenue (TR) earned by a firm?

Answer Review

1 In perfect competition, how do we conceptualize the Total Revenue (TR) earned by a firm?

A It is the revenue earned after deducting all variable costs.

B It is the revenue minus the total fixed cost of production.

C It is the extra revenue from selling one additional unit.

D It is the market price of the good multiplied by the quantity produced and sold.

💡 Short Explanation

Total Revenue is the firm's total sales income. It depends on market price and quantity sold. Formula: TR = p × q.

✅ Correct Answer Explanation

In a perfectly competitive market, the firm sells every unit of output at the prevailing market price. Therefore, Total Revenue equals the market price multiplied by the quantity sold. TR = p × q Option D is correct because it gives the NCERT definition of Total Revenue. Option A is incorrect because deducting variable costs relates to profit analysis, not Total Revenue. Option B is incorrect because Total Revenue is calculated before deducting any costs. Option C is incorrect because it defines Marginal Revenue, not Total Revenue.

❓ Why Other Options Are Incorrect

Option A → It is the revenue earned after deducting all variable costs.

Total Revenue is measured before deducting any costs.

Option B → It is the revenue minus the total fixed cost of production.

Fixed costs are not deducted when calculating Total Revenue.

Option C → It is the extra revenue from selling one additional unit.

This defines Marginal Revenue.

🎯 Strategy

Used: Elimination

Application:

Eliminate options involving costs or Marginal Revenue, leaving the standard definition of Total Revenue.

Final Logic:

TR always equals Price × Quantity, making Option D correct.

🧠 Memory Trick

TR = Price × Quantity

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Total Revenue

2 If a firm sells 10 units of a good at a market price of Rs 15 per unit, which equation correctly determines the Total Revenue (TR)?

A TR = 15 / 10 = Rs 1.5

B TR = 15 + 10 = Rs 25

C TR = 15 × 10 = Rs 150

D TR = 10 / 15 = Rs 0.67

💡 Short Explanation

Use TR = p × q. Price = Rs 15. Quantity = 10 units.

✅ Correct Answer Explanation

The NCERT formula for Total Revenue is: TR = Price × Quantity Substituting the values: TR = 15 × 10 = Rs 150 Option C is correct because it correctly applies the formula. Option A incorrectly divides price by quantity. Option B incorrectly adds price and quantity. Option D incorrectly divides quantity by price.

❓ Why Other Options Are Incorrect

Option A → TR = 15 / 10 = Rs 1.5

Revenue is calculated by multiplication, not division.

Option B → TR = 15 + 10 = Rs 25

Addition does not calculate Total Revenue.

Option D → TR = 10 / 15 = Rs 0.67

Quantity divided by price has no relevance to Total Revenue.

🎯 Strategy

Used: Substitution

Application:

Substitute the given values into TR = p × q.

Final Logic:

15 × 10 = Rs 150, making Option C correct.

🧠 Memory Trick

Multiply Price and Quantity

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Total Revenue Formula

📄 Passage

A firm earns revenue by selling the good that it produces in the market. Let the market price of a unit of the good be p, and let q be the quantity of the good produced and sold. Total revenue (TR) is defined as the market price of the good multiplied by the firm's output.

Based on the passage, if p = Rs 25 and q = 4, what is the firm's TR?

A Rs 50

B Rs 100

C Rs 29

D Rs 21

💡 Short Explanation

TR = p × q. Price = Rs 25. Quantity = 4 units.

✅ Correct Answer Explanation

The passage states that Total Revenue equals the market price multiplied by the quantity sold. Therefore, TR = 25 × 4 = Rs 100 Option B is correct because it correctly applies the Total Revenue formula. Option A is too low. Option C incorrectly adds the values. Option D is unrelated to the calculation.

❓ Why Other Options Are Incorrect

Option A → Rs 50

This would correspond to only two units sold.

Option C → Rs 29

This incorrectly combines the numerical values.

Option D → Rs 21

This is not obtained using the Total Revenue formula.

🎯 Strategy

Used: Substitution

Application:

Insert the given values into TR = p × q.

Final Logic:

25 × 4 = Rs 100, making Option B correct.

🧠 Memory Trick

Price × Quantity = TR

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Numerical Illustration of Total Revenue

📄 Passage

From the passage, if the market price (p) remains strictly constant, what ultimately determines the changes in total revenue (TR)?

A Changes in the firm's output (q).

B Changes in the average cost.

C Changes in the competitor's prices.

D Changes in the marginal cost.

💡 Short Explanation

Price remains fixed. Output varies. TR changes only because quantity changes.

✅ Correct Answer Explanation

The passage explains that: TR = p × q When the market price p is constant, the only variable affecting Total Revenue is the quantity sold (q). Therefore, any increase or decrease in output directly changes Total Revenue. Option A is correct because output is the only changing factor. Option B is incorrect because costs do not determine revenue. Option C is incorrect because competitor prices are irrelevant when market price is fixed. Option D is incorrect because Marginal Cost affects production decisions, not the revenue formula.

❓ Why Other Options Are Incorrect

Option B → Changes in the average cost.

Average Cost influences profitability, not Total Revenue.

Option C → Changes in the competitor's prices.

The firm's revenue depends on the market price and its own output.

Option D → Changes in the marginal cost.

Marginal Cost does not appear in the Total Revenue equation.

🎯 Strategy

Used: Contextual/Tonal Matching

Application:

Use the relationship explained directly in the passage.

Final Logic:

With constant price, only output changes Total Revenue.

🧠 Memory Trick

Constant Price → Output Changes TR

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Relationship between Output and Total Revenue

5 Why does the total revenue curve form an upward rising straight line?

A Because output quantity remains constant.

B Because the firm can charge different prices.

C Because total cost is zero.

D Because the market price (p) is constant.

💡 Short Explanation

TR = p × q. Price remains constant. Revenue increases proportionately with output.

✅ Correct Answer Explanation

Under perfect competition, the market price remains constant for every unit sold. Since TR = p × q and p is constant, Total Revenue increases by the same amount for every additional unit sold. Therefore, the Total Revenue curve is an upward-sloping straight line. Option D is correct because constant price produces a linear relationship. Option A is incorrect because output does not remain constant. Option B is incorrect because firms are price takers and cannot charge different prices. Option C is incorrect because Total Cost has no effect on the shape of the Total Revenue curve.

❓ Why Other Options Are Incorrect

Option A → Because output quantity remains constant.

The graph shows revenue changing as output changes.

Option B → Because the firm can charge different prices.

Firms cannot choose different prices under perfect competition.

Option C → Because total cost is zero.

Cost does not determine the shape of the Total Revenue curve.

🎯 Strategy

Used: Contextual/Tonal Matching

Application:

Relate the equation TR = p × q to its graphical representation.

Final Logic:

A constant market price produces a straight-line Total Revenue curve, making Option D correct.

🧠 Memory Trick

Constant Price = Straight TR

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Total Revenue Curve

6 Assertion (A): The TR curve is a straight line.
Reason (R): The equation TR = p × q operates with a constant market price p.

A A is true, R is false.

B A is false, R is true.

C Both A and R are true, and R is the correct explanation of A.

D Both A and R are false.

💡 Short Explanation

Total Revenue equals Price × Quantity. Market price remains constant. Therefore, the TR curve is a straight line.

✅ Correct Answer Explanation

In a perfectly competitive market, the market price (p) remains constant because the firm is a price taker. Since: TR = p × q and p is fixed, Total Revenue changes proportionately with output (q). This produces an upward-sloping straight-line TR curve. Option C is correct because both the Assertion and Reason are true, and the Reason correctly explains why the TR curve is linear. Option A is incorrect because the Reason is true. Option B is incorrect because the Assertion is true. Option D is incorrect because both statements are true.

❓ Why Other Options Are Incorrect

Option A → A is true, R is false.

The Reason is correct because price remains constant.

Option B → A is false, R is true.

The TR curve is indeed a straight line.

Option D → Both A and R are false.

Both statements correctly describe Total Revenue.

🎯 Strategy

Used: Contextual/Tonal Matching

Application:

Link the algebraic equation TR = p × q with its graphical representation.

Final Logic:

Constant price results in a straight-line TR curve, making Option C correct.

🧠 Memory Trick

Constant Price → Straight TR

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Total Revenue Curve

7 Because TR = p × q, when output q is zero, TR is zero. This mathematical rule dictates that the TR curve must physically start exactly from _____.

A the price intercept

B the origin

C the highest output level

D a positive y-intercept

💡 Short Explanation

Zero output means zero sales. Zero sales produce zero revenue. The graph begins at the origin.

✅ Correct Answer Explanation

The Total Revenue equation is: TR = p × q When output (q) is zero, TR = p × 0 = 0 Thus, the Total Revenue curve passes through the origin (0,0) because both output and revenue are zero. Option B is correct because the graph starts at the origin. Option A is incorrect because the price intercept belongs to the AR curve. Option C is unrelated to the graph's starting point. Option D is incorrect because the TR curve has no positive y-intercept.

❓ Why Other Options Are Incorrect

Option A → the price intercept

The price intercept belongs to the Price Line (AR curve), not the TR curve.

Option C → the highest output level

The TR curve begins at zero output.

Option D → a positive y-intercept

Revenue is zero when output is zero.

🎯 Strategy

Used: Substitution

Application:

Substitute q = 0 into TR = p × q.

Final Logic:

Zero output gives zero revenue, so the curve starts at the origin.

🧠 Memory Trick

0 Output → 0 TR

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Origin of the Total Revenue Curve

8 Match the graphical characteristics of TR (List I) with their algebraic meaning (List II).

List I	List II
1. Vertical height (Aq₁)	a. Total revenue
2. Horizontal distance (Oq₁)	b. Output (1 unit)
3. Slope of TR line (Aq₁/Oq₁)	c. Equals market price (p)
4. Curve starting point (0,0)	d. Point O

A 1-b, 2-a, 3-d, 4-c

B 1-d, 2-c, 3-b, 4-a

C 1-a, 2-b, 3-c, 4-d

D 1-c, 2-b, 3-d, 4-a

💡 Short Explanation

Vertical height represents Total Revenue. Horizontal distance represents output. The slope equals the market price.

✅ Correct Answer Explanation

From the NCERT graph of the Total Revenue curve: Vertical height (Aq₁) represents Total Revenue. Horizontal distance (Oq₁) measures the firm's output. Slope (Aq₁/Oq₁) equals the market price (p) because TR = p × q. The curve begins at Point O, the origin. Thus, the correct matching is: 1 → a 2 → b 3 → c 4 → d Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A
Reverses the meanings of output and Total Revenue.
Option B
Incorrectly matches the graphical measurements.
Option D
Incorrectly identifies the vertical height and origin.

🎯 Strategy

Used: Option Grouping

Application:

Match each graph component individually before selecting the complete answer.

Final Logic:

Only Option A correctly matches every graphical characteristic.

🧠 Memory Trick

Height = TR | Base = Output | Slope = Price

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Total Revenue Graph

9 Consider the following statements about Average Revenue (AR):
1. AR is the profit earned per unit of output.
2. AR is defined as total revenue per unit of output.
Which statement is correct?

A Both 1 and 2

B Only 1

C Neither 1 nor 2

D Only 2

💡 Short Explanation

AR measures revenue per unit sold. Profit and revenue are different concepts. AR = TR ÷ Quantity.

✅ Correct Answer Explanation

Average Revenue is defined as: AR = TR ÷ q Therefore, Statement 2 is correct. Statement 1 is incorrect because profit is calculated as: Profit = TR − TC Profit per unit is not the definition of Average Revenue. Option D is correct because only Statement 2 is true. Option A incorrectly treats Statement 1 as correct. Option B incorrectly rejects Statement 2. Option C incorrectly rejects both statements.

❓ Why Other Options Are Incorrect

Option A → Both 1 and 2

Statement 1 confuses revenue with profit.

Option B → Only 1

Statement 2 gives the correct NCERT definition.

Option C → Neither 1 nor 2

Statement 2 is correct.

🎯 Strategy

Used: Option Grouping

Application:

Evaluate each statement independently before selecting the correct combination.

Final Logic:

Only Statement 2 correctly defines Average Revenue.

🧠 Memory Trick

AR = Revenue per Unit

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Average Revenue

10 Using the formula AR = TR / q, if TR = (p × q), which mathematical simplification correctly proves AR = p?

A AR = (p × q) × q = p

B AR = (p + q) / q = p

C AR = (p × q) / q = p

D AR = p / (q × TR) = p

💡 Short Explanation

AR = TR ÷ q. Substitute TR = p × q. Quantity cancels, leaving AR = p.

✅ Correct Answer Explanation

The NCERT derives Average Revenue (AR) as follows: AR = TR ÷ q Since, TR = p × q Substituting, AR = (p × q) ÷ q AR = p Thus, Average Revenue equals the market price. Option C correctly demonstrates this simplification. Option A incorrectly multiplies by quantity. Option B incorrectly adds price and quantity. Option D uses an incorrect mathematical expression.

❓ Why Other Options Are Incorrect

Option A → AR = (p × q) × q = p

Multiplication by q is mathematically incorrect.

Option B → AR = (p + q) / q = p

Addition cannot produce the required derivation.

Option D → AR = p / (q × TR) = p

This expression is unrelated to the definition of AR.

🎯 Strategy

Used: Substitution

Application:

Replace TR with p × q and simplify algebraically.

Final Logic:

Cancelling q gives AR = p, making Option C correct.

🧠 Memory Trick

TR/q → p

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Derivation of Average Revenue

11 For a price-taking firm, why is Average Revenue exactly equal to the market price?

A Because the firm controls the market price.

B Because every unit is sold at the identical fixed market price, making the average per unit identical to that price.

C Because total revenue is equal to zero.

D Because marginal cost is equal to average cost.

💡 Short Explanation

A price-taking firm sells every unit at the same market price. Average Revenue is revenue per unit sold. Therefore, AR equals the market price.

✅ Correct Answer Explanation

In perfect competition, a firm has no control over price and must accept the prevailing market price. Since every unit of output is sold at the same price, TR = p × q and AR = TR ÷ q = (p × q) ÷ q = p Thus, Average Revenue is exactly equal to the market price. Option B is correct because it correctly explains why AR equals the market price. Option A is incorrect because firms are price takers, not price makers. Option C is incorrect because Total Revenue is generally positive when output is sold. Option D is incorrect because AR has no direct relationship with Marginal Cost.

❓ Why Other Options Are Incorrect

Option A → Because the firm controls the market price.

Under perfect competition, the market determines price.

Option C → Because total revenue is equal to zero.

Total Revenue is zero only when output is zero.

Option D → Because marginal cost is equal to average cost.

Marginal Cost and Average Revenue are different concepts.

🎯 Strategy

Used: Contextual/Tonal Matching

Application:

Apply the price-taking assumption explained in the NCERT.

Final Logic:

Every unit is sold at the same market price, so AR = Price, making Option B correct.

🧠 Memory Trick

Same Price → Same Average

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Average Revenue Equals Price

12 The AR curve under perfect competition is perfectly horizontal and is interchangeably referred to as the _____.

A price line

B variable cost line

C supply curve

D total revenue curve

💡 Short Explanation

AR remains constant at every output level. The AR curve is horizontal. This horizontal line is called the Price Line.

✅ Correct Answer Explanation

Since a perfectly competitive firm sells every unit at the same market price, Average Revenue remains constant regardless of output. When AR is plotted against output, it forms a horizontal straight line known as the Price Line. This line also represents the firm's demand curve. Option A is correct because the horizontal AR curve is called the Price Line. Option B is incorrect because the Variable Cost Line is unrelated to revenue. Option C is incorrect because the supply curve is different from the Price Line. Option D is incorrect because the Total Revenue curve slopes upward.

❓ Why Other Options Are Incorrect

Option B → variable cost line

Variable Cost is a cost concept, not a revenue curve.

Option C → supply curve

The supply curve represents output supplied at different prices.

Option D → total revenue curve

Total Revenue increases with output and is not horizontal.

🎯 Strategy

Used: Contextual/Tonal Matching

Application:

Recall the NCERT figure where the horizontal AR curve is labelled as the Price Line.

Final Logic:

The horizontal AR curve is called the Price Line, making Option A correct.

🧠 Memory Trick

Horizontal AR = Price Line

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Price Line

13 Match the curve names (List I) to their shapes (List II) for a perfectly competitive firm.

List I	List II
1. Total Revenue Curve	a. Upward rising straight line
2. Price Line	b. Horizontal straight line
3. Average Revenue Curve	c. Horizontal straight line
4. Demand Curve facing the firm	d. Horizontal straight line

A 1-b, 2-a, 3-d, 4-c

B 1-c, 2-b, 3-a, 4-d

C 1-d, 2-c, 3-b, 4-a

D 1-a, 2-b, 3-c, 4-d

💡 Short Explanation

TR rises with output. Price Line, AR curve and Demand curve are horizontal. The matching follows NCERT graphs.

✅ Correct Answer Explanation

For a perfectly competitive firm: Total Revenue Curve is an upward-rising straight line. Price Line is a horizontal straight line. Average Revenue Curve is also horizontal. Demand Curve facing the firm is perfectly elastic, represented by a horizontal line. Therefore: 1 → a 2 → b 3 → c 4 → d Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A
Incorrectly identifies the Total Revenue curve as horizontal.
Option B
Reverses the shapes of the Total Revenue and AR curves.
Option C
Incorrectly matches the graphical representations.

🎯 Strategy

Used: Option Grouping

Application:

Identify each graph independently before matching.

Final Logic:

Only Option D correctly matches all four curves.

🧠 Memory Trick

TR Rises | AR Stays Flat

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Revenue Curves

14 Arrange the sequence connecting the AR curve to the firm's demand:
1. Creating a perfectly elastic demand scenario.
2. Thus, the firm can sell as many units as it wants at price p.
3. The firm faces a horizontal AR curve at market price p.
4. This horizontal price line also represents the firm's demand curve.

A 4, 3, 2, 1

B 1, 2, 3, 4

C 3, 4, 2, 1

D 2, 1, 4, 3

💡 Short Explanation

The AR curve is horizontal. It also represents the demand curve. This leads to perfectly elastic demand.

✅ Correct Answer Explanation

The logical sequence is: Step 3: The firm faces a horizontal AR curve at market price p. Step 4: This horizontal line also represents the firm's demand curve. Step 2: Therefore, the firm can sell as many units as it wishes at price p. Step 1: This creates a perfectly elastic demand curve. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A
Begins with the demand curve before introducing the AR curve.
Option B
Starts with the conclusion instead of the graphical explanation.
Option D
Places the selling condition before establishing the demand curve.

🎯 Strategy

Used: Contextual/Tonal Matching

Application:

Follow the same logical order used in the NCERT explanation.

Final Logic:

The sequence is 3 → 4 → 2 → 1, making Option C correct.

🧠 Memory Trick

AR → Demand → Sell → Elastic

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Demand Curve Facing a Firm

15 Which of the following accurately defines Marginal Revenue?
I. The decrease in total cost from producing one more unit.
II. The increase in total revenue for a unit increase in the firm's output.

A Only II

B Only I

C Both I and II

D Neither I nor II

💡 Short Explanation

MR measures additional revenue. It is not related to changes in cost. MR = Change in TR ÷ Change in Output.

✅ Correct Answer Explanation

Marginal Revenue is defined as the increase in Total Revenue resulting from selling one additional unit of output. Statement II correctly defines Marginal Revenue. Statement I is incorrect because it describes a change in cost, whereas MR is a revenue concept. Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Only I

Statement I refers to cost rather than revenue.

Option C → Both I and II

Statement I is incorrect.

Option D → Neither I nor II

Statement II is the correct NCERT definition.

🎯 Strategy

Used: Option Grouping

Application:

Evaluate each statement separately before selecting the correct combination.

Final Logic:

Only Statement II correctly defines Marginal Revenue.

🧠 Memory Trick

MR = Extra Revenue

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Marginal Revenue

16 If Total Revenue changes from Rs 20 to Rs 30 when quantity sold changes from 2 boxes to 3 boxes, what is the MR?

A MR = (30 - 20) / (3 - 2) = 10

B MR = (30 + 20) / (3 + 2) = 10

C MR = 30 / 3 = 10

D MR = 20 / 2 = 10

💡 Short Explanation

MR measures additional revenue. Formula: MR = ΔTR ÷ ΔQ. Here, MR = (30 − 20) ÷ (3 − 2) = Rs 10.

✅ Correct Answer Explanation

Marginal Revenue (MR) is defined as the increase in Total Revenue resulting from selling one additional unit of output. The formula is: MR = ΔTR ÷ ΔQ Substituting the given values: MR = (30 − 20) ÷ (3 − 2) MR = 10 ÷ 1 MR = Rs 10 Therefore, Marginal Revenue (MR) = Rs 10. Option A is correct because it correctly applies the NCERT formula. Option B is incorrect because MR is calculated using differences, not sums. Option C is incorrect because it calculates Average Revenue, not Marginal Revenue. Option D is incorrect because it divides the original TR by the original quantity instead of calculating the change.

❓ Why Other Options Are Incorrect

Option B → MR = (30 + 20) / (3 + 2) = 10

Marginal Revenue uses changes (differences), not additions.

Option C → MR = 30 / 3 = 10

This calculates Average Revenue, not Marginal Revenue.

Option D → MR = 20 / 2 = 10

This also represents Average Revenue for the initial output level.

🎯 Strategy

Used: Substitution

Application:

Apply the standard formula MR = ΔTR ÷ ΔQ using the given values.

Final Logic:

The increase in revenue is Rs 10 for one extra unit, making Option A correct.

🧠 Memory Trick

MR = ΔTR ÷ ΔQ

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Marginal Revenue Formula

17 Setting the algebra aside, when a firm increases its output by one unit, this extra unit is sold at the market price, meaning the ____ is precisely the market price.

A Total Cost

B Average Cost

C Variable Revenue

D Marginal Revenue

💡 Short Explanation

One extra unit earns one extra price. Additional revenue is Marginal Revenue. Therefore, MR equals the market price.

✅ Correct Answer Explanation

Under perfect competition, every additional unit produced is sold at the prevailing market price. Hence, the increase in Total Revenue from selling one more unit is exactly equal to the market price. Therefore, MR=PriceMR = PriceMR=Price Option D is correct because Marginal Revenue measures the additional revenue earned from one extra unit. Option A is incorrect because Total Cost is unrelated to revenue. Option B is incorrect because Average Cost is a cost concept. Option C is incorrect because "Variable Revenue" is not an NCERT revenue concept.

❓ Why Other Options Are Incorrect

Option A → Total Cost

Total Cost measures production expenditure, not additional revenue.

Option B → Average Cost

Average Cost has no role in defining Marginal Revenue.

Option C → Variable Revenue

This is not a recognised revenue concept in the NCERT.

🎯 Strategy

Used: Contextual/Tonal Matching

Application:

Relate the phrase "extra unit sold" directly to the definition of Marginal Revenue.

Final Logic:

The extra revenue from one additional unit is Marginal Revenue, making Option D correct.

🧠 Memory Trick

Extra Unit → Extra Revenue → MR

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: MR Equals Price

18 Assertion (A): MR = AR under perfect competition.
Reason (R): Both Marginal Revenue and Average Revenue are strictly equal to the constant market price (p).

A A is true, R is false.

B A is false, R is true.

C Both A and R are true, and R is the correct explanation.

D Both A and R are false.

💡 Short Explanation

Every unit sells at the same market price. AR equals Price. MR also equals Price.

✅ Correct Answer Explanation

In a perfectly competitive market, the firm is a price taker and sells every unit at the same market price. Therefore, AR = Price MR = Price Hence, MR=AR=pMR = AR = pMR=AR=p The Reason correctly explains why the Assertion is true. Option C is correct. Option A is incorrect because the Reason is true. Option B is incorrect because the Assertion is true. Option D is incorrect because both statements are correct.

❓ Why Other Options Are Incorrect

Option A → A is true, R is false.

The Reason correctly explains the Assertion.

Option B → A is false, R is true.

The Assertion is also true.

Option D → Both A and R are false.

Both statements are correct.

🎯 Strategy

Used: Contextual/Tonal Matching

Application:

Recall the NCERT relationship among Price, AR and MR.

Final Logic:

Since MR = AR = Price, Option C is correct.

🧠 Memory Trick

Price = AR = MR

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Relationship among Price, AR and MR

19 Match the equations (List I) with their corresponding variables for a price-taking firm (List II).

List I	List II
1. TR equation	a. Zero
2. AR equation	b. p × q
3. MR equation	c. p
4. Demand curve slope	d. p

A 1-a, 2-b, 3-c, 4-d

B 1-d, 2-a, 3-b, 4-c

C 1-c, 2-d, 3-a, 4-b

D 1-b, 2-c, 3-d, 4-a

💡 Short Explanation

TR = p × q. AR = p. MR = p. Horizontal demand curve has zero slope.

✅ Correct Answer Explanation

For a perfectly competitive firm: TR = p × q AR = p MR = p The firm's demand curve is horizontal, so its slope is zero. Therefore, 1 → b 2 → c 3 → d 4 → a Thus, Option D is correct.

❓ Why Other Options Are Incorrect

Option A
Total Revenue is not zero.
Option B
Reverses the revenue equations.
Option C
Incorrectly matches TR and the demand curve slope.

🎯 Strategy

Used: Option Grouping

Application:

Recall each revenue formula separately before matching.

Final Logic:

Only Option B correctly matches every equation.

🧠 Memory Trick

TR = PQ | AR = P | MR = P | Demand Slope = 0

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Revenue Relationships

20 Arrange the algebraic steps used to derive MR = p:
1. MR = [p(q2 - q1)] / (q2 - q1)
2. Given market price p, MR = (pq2 - pq1) / (q2 - q1)
3. MR = p
4. Consider output changes from q1 to q2

A 4, 2, 1, 3

B 1, 2, 3, 4

C 4, 3, 2, 1

D 2, 1, 4, 3

💡 Short Explanation

Begin with a change in output. Substitute the TR expression. Simplify the equation. Obtain MR = p.

✅ Correct Answer Explanation

The derivation follows this logical sequence: Step 4: Consider output changing from q₁ to q₂. Step 2: Write the marginal revenue expression: MR = (pq₂ − pq₁) / (q₂ − q₁). Step 1: Factor out the common factor p: MR = [p(q₂ − q₁)] / (q₂ − q₁). Step 3: Cancel (q₂ − q₁) from the numerator and denominator to obtain: MR = p. Thus, Option A correctly presents the algebraic derivation used in the NCERT.

❓ Why Other Options Are Incorrect

Option B → 1, 2, 3, 4

Starts with a simplification before introducing the original expression.

Option C → 4, 3, 2, 1

Begins with the conclusion before completing the derivation.

Option D → 2, 1, 4, 3

Introduces the algebra before defining the change in output.

🎯 Strategy

Used: Contextual/Tonal Matching

Application:

Arrange the mathematical derivation exactly as presented in the NCERT.

Final Logic:

The derivation proceeds 4 → 2 → 1 → 3, making Option A correct.

🧠 Memory Trick

Change → Substitute → Simplify → MR = p

📚 Class XII – Introductory Microeconomics – Chapter: The Theory of the Firm under Perfect Competition – Topic: Algebraic Derivation of Marginal Revenue

CUET UG Booster Economics 4 Test (M2)

Test Complete!

Answer Review