JNU Past year doubts

[SoniaKapoor]

 Q1 Given that a firm’s fixed costs are Rs 1,000, the average total cost of its output is Rs 4 and its
average variable cost is Rs 3.50, which one of the following will represent its total output per
period?
A. 2,000 units
B. 1,750 units
C. 250 units
D. Insufficient information provided.

Q2 In the short run, a reduction in aggregate demand is
A. Likely to cause a reduction in the price level.
B. Unlikely to cause a reduction in the price level because of the interest rate effect
C. Unlikely to cause a reduction in the price level because of menu costs
D. Likely to cause a reduction in aggregate supply.

[Arushi :))]

Q1.
Average total cost = Total cost/ total output
                         = (Fixed cost/total output)+( variable cost/ total output)
                        4= (1000/Q) + average variable cost
                        4= (1000/Q) + 3.50
                => 1000/Q = 1/2 => Q = 2,000 units.
For Q 2, i ll go with a.

[kangkan]

for 2 ,i will go with menu costs..because according to keneysian theory , prices are rigid in the short term due to menu costs

[The Villain]

Q1 a
Q2 c