Can there be a positive level of output that a profit-maximising firm produces in a competitive market at which market price is not equal to marginal cost? Give an explanation.
There cannot be any positive level of output that a firm producers at which price is not equal to MC. Let us evaluate the following two cases where price is not equal to MC.
Case A: If P MC
At output Oq1, price is Kq1 while the MC is Lq1. So Oq1 is not the profit maximising output. This is due to the fact that the firm can increase its profit level by expanding its output to Oq2.
Case B: If P
At output Oq3 price is Hq3 and MC is Gq3 . so Oq3 is not the profit maximising output . this is because the firm can increase its profit by reducing its output level to Oq2. Thus at profit maximising point price must be equal to MC and it cannot be greater or lesser than MC.
The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.
A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?
What is the supply curve of a firm in the long run?
How does the imposition of a unit tax affect the supply curve of a firm?
What is the relation between market price and average revenue of a price-taking firm?
What is the relation between market price and marginal revenue of a price-taking firm?
How does an increase in the number of firms in a market affect the market supply curve?
How does an increase in the price of an input affect the supply curve of a firm?
Compute the total revenue, marginal revenue and average revenue schedules in the following table. Market price of each unit of the good is Rs 10.
Quantity Sold | TR | MR | AR |
---|---|---|---|
0 1 2 3 4 5 6 |
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.
Explain the concept of a production function
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 do you mean by the budget set of a consumer?
What is the total product of input?
From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Marginal Revenue |
10 |
6 |
2 |
2 |
2 |
0 |
0 |
0 |
- |
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?
What is budget line?
If duo poly behavior is one that is described by Cornet, the market demand curve is given by the equation q = 200 - 4p and both the firms have zero costs, find the quantity supplied by each firm in equilibrium and the equilibrium market price.
Consider the demand curve D (p) = 10 – 3p. What is the elasticity at price 53?
Discuss the central problems of an economy.
How are the equilibrium price and quantity affected when?
(a) Both demand and supply curves shift in the same direction?
(b) Demand and supply curves shift in opposite directions?
What happens to the budget set if both the prices as well as the income double?
How is the wage rate determined in a perfectly competitive labor market?
Explain the relationship between the marginal products and the total product of an input.
How is the equilibrium number of firms determined in a market where entry and exit is permitted?
What is the reason for the long run equilibrium of a firm in monopolistic competition to be associated with zero profit?
When does a production function satisfy decreasing returns to scale?