Institute of Chartered Financial Analysts of India (ICFAI) University 2007 Certification Finance Economics (CFA520): - Question Paper

(d) The fixed cost is lower than the total variable cost
(e) The price is equal to minimum of avg. variable cost.
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27. Neelam Pvt. Ltd. is operating in a perfectly competitive industry. If the firm doubles its output during
the year, then
(1 mark)
(a) Price of the product falls more than proportionately
(b) Price of the product falls less than proportionately
(c) Price of the product falls proportionately
(d) Price of the product remains identical
(e) Price of the product rises.
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28. Which of the subsequent conditions are necessary in the short run equilibrium in monopolistic
competition?
(1 mark)
(a) Marginal cost = Marginal revenue
(b) Price = avg. total cost
(c) Price = Marginal revenue
(d) Price = Marginal cost
(e) Price = avg. fixed cost.
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29. The subsequent is the cost function of Manish & Co., a sole producer of oil paints.
C = 100 + 20Q
Manish & Co. can segregate the market into 2 various sub markets – A and B. The demand
functions for the 2 markets are estimated as
PA = 50 – QA
PB = 30 – 0.5QB
The output at which the monopolist makes the maximum profit is
(2 marks)
(a) 50 units
(b) 35 units
(c) 25 units
(d) 40 units
(e) 30 units.
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30. Media Soft, a multimedia firm enters a monopolistically competitive market. The demand and cost
function faced by Media Soft are provided as
P = 10,000 – 20Q
TC = 3,00,000 + 2,197Q – 20Q2 + Q3
The short run equilibrium output of the firm is
(2 marks)
(a) 11 units
(b) 51 units
(c) 61 units
(d) 71 units
(e) 81 units.
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31. The industry demand function for a product in a duopoly is P = 500 – 2Q. The reaction functions of the
two firms are as follows:
Q1 = 380 – 2Q2
Q2 = 200 – Q1
Equilibrium price of the product is
(2 marks)
(a) Rs.100
(b) Rs.180
(c) Rs.200
(d) Rs.380
(e) Rs.400.
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32. Ring tone, a firm specializing in mobile handsets, faces a monopolistically competitive market. In the
long run, the company will earn only normal profits because of

Earning:   Approval pending.