Ayushi posted an Question
August 27, 2020 • 18:44 pm 30 points
  • UGC NET
  • Economics

24. a firm will receive abnormal profit in the short run if (1) vmp> mfc (2) vmp

24. A firm will receive abnormal profit in the short run if (1) VMP> MFC (2) VMP

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    Nidhi taparia Best Answer

    24. The right answer is (1). Firm makes abnormal profit when in short run, VMP > MFC. At equilibrium MFC = MRP. When VMP > MRP, it means AR > MR or non-competitive market is existing. 25. As far as this question is concerned, I'd say the relationship is indeterminate. This is because as per Ricardian theory, price determines rent. As price rises, so does rent. But in modern theory, rent enters price or cost of production, as land is a factor of production or input. Hence rent determines price as well. So there is no final conclusion in this regard

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