Welcome to the NCERT Solutions for Class 12 Micro Economics - Chapter Non-competitive Markets. This page offers a step-by-step solution to the specific question from Exercise 1, Question 10: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.
What is the reason for the long run equilibrium of a firm in monopolistic competition to be associated with zero profit?
The long run time horizon is featured by the free entry and exit of firms. If the firms in the short run are earning abnormal or super normal profits, then, new firms will be attracted to enter the market. Due to the new entrants, the market supply will increase. It leads to the reduction in the price that ultimately falls sufficiently to become equal to the minimum of average cost. When the market price is equal to the minimum of AC, it implies that all the firms earn normal profit or zero economic profit. On the contrary, if in the short run the firms are earning abnormal losses, then the existing firms will stop production and exit the market. This will lead to a decrease in the market supply, which will ultimately raise the price. The price will continue to rise until it becomes equal to the minimum of AC. Price = AC implies that in the long run all the firms will earn zero economic profit. Hence, when the price is equal to the minimum of AC, neither any existing firm will exit nor any new firm will enter the market.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
Stay updated with our latest educational content and study tips
Have you ever noticed that doing activities such as playing outdoors, chilling with your friends, or using the mobile phone feels so effortless and fun? Whenever you might have played sports, you kept on playing even when it felt hard initially just so you could get that feeling after the game, a feeling of accomplishment, … Read more
Read MoreImagine this; You’re sitting in the test hall, pen in hand, and the question paper has been put in front of you. Rather than freezing, you feel calm, collected, and set. Why? As you have formerly been there in your mind. You’ve seen yourself sitting composibly, reviewing the question paper fluently, performing well in the … Read more
Read MoreParent-Teacher Meetings (PTMs) are more than quick updates on marks — they’re a chance to build a real partnership between home and school. A good Parent-Teacher Meeting conversation helps parents see beyond grades. It opens up insights about a child’s strengths, struggles, emotions and even hidden talents. When parents participate actively, they don’t just track … Read more
Read MoreIn today’s world of endless information , knowing how to think is more important than knowing what to think . From school projects to real – life decisions , critical thinking helps students question ideas , analyze facts and form logical conclusions . But what exactly does critical thinking mean ? Simply put , it’s … Read more
Read MoreWelcome to the NCERT Solutions for Class 12 Micro Economics - Chapter . This page offers a step-by-step solution to the specific question from Excercise 1 , Question 10: What is the reason for the long run equilibrium of a firm in monopolistic competition to be associat....
Add Comment