Class 12 Micro Economics - Chapter Production and Costs NCERT Solutions | Let the production function of a firm be

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? 

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

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

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.

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

What is the law of variable proportions? 

What is the law of diminishing marginal product? 

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?

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

Suppose the demand and supply curves of salt are given by:

(a) Find the equilibrium price and quantity.

(b) Now, suppose that the price of an input that used to produce salt has increased so, that the new supply curve is qs = 400 + 3p

How does the equilibrium price and quantity change? Does the change conform to your expectation?

(a) Suppose the government has imposed at ax of Rs 3 per unit of sale on salt. How does it affect the equilibrium rice quantity? 

How are equilibrium price and quantity affected when income of the consumers

a) Increase

b) Decrease

How do the equilibrium price and the quantity of a commodity change when the price of input used in its production changes?

How is the wage rate determined in a perfectly competitive labor market?

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

Suppose the demand and supply curve of commodity XX in a perfectly competitive market are given by:

qD =700 - p

qs = 500 + 3p for p ≥ 15

= 0 or 0 ≤ p <15

Assume that the market consists of identical firms. Identify the reason behind the market supply of commodity X being zero at any price less than Rs 15. What will be the equilibrium price for this commodity? At equilibrium, what quantity of X will be produced?

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. 

At what level of price do the firms in a perfectly competitive market supply when free entry and exit is allowed in the market? How is the equilibrium quantity determined in such a market?

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