Class 12 Micro Economics - Chapter Production and Costs NCERT Solutions | What is the law of diminishing marginal

What is the total product of input?

When does a production function satisfy decreasing returns to scale? 

Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve? 

Explain the relationship between the marginal products and the total product of an input. 

The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.

Why is the short-run marginal cost curve 'U'-shaped? 

What do the long-run marginal cost and the average cost curves look like? 

What are the average fixed cost, average variable cost and average cost of a firm? How are they related? 

What are the average fixed cost, average variable cost and average cost of a firm? How are they related? 

What does the average fixed cost curve look like? Why does it look so? 

What would be the shape of the demand curve so that the total revenue curve is?

(a) A positively sloped straight line passing through the origin?

(b) A horizontal line?

Explain market equilibrium.

Discuss the central problems of an economy.

What are the characteristics of a perfectly competitive market?

What do you mean by the budget set of a consumer?

From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:

When do we say that there is an excess demand for a commodity in the market?

What do you mean by the production possibilities of an economy?

How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?

What is budget line?

What is the ‘price line’?

How is the optimal amount of labor determined in a perfectly competitive market?

Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.

In what respect do the supply and demand curves in the labor market differ from those in the goods market?

What will happen if the price prevailing in the market is?

i. Above the equilibrium price

Ii. Below the equilibrium price

What are the characteristics of a perfectly competitive market?

Considering the same demand curve as in exercise 22, now let us understand for free entry and exit of the firms producing commodity X. Also assume the market consists of identical firms producing commodity X. Let the supply curve of a single firm be explained?

q*= 8+3p for p ≥ 20

= 0 for 0 ≤ p ≤ Rs 20

(a) What is the significance of p =20?

(b) At what price will the market for X be in equilibrium? State the reason for your answer.

(c) Calculate the equilibrium quantity and number of firms. 

A shift in demand curve has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exits is permitted. Explain.

Compare the effect of shift in the demand curve on the equilibrium when the number of firms in the market is fixed with the situation when entry-exit is permitted.

Will a profit-maximising firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.