Class 12 Micro Economics - Chapter The Theory of the Firm under Perfect Competition NCERT Solutions | How does the imposition of a unit tax af
How does the imposition of a unit tax affect the supply curve of a firm?
A unit tax is the tax imposed on per unit of the output sold. Due to the imposition of unit tax, the cost of production per unit of output increases, which ultimately increases the marginal cost. Consequently, the LMC curve will shift leftward upward and as the supply curve is a portion of LMC, so the supply curve will also shift leftward upward. Let us understand the effect of imposition of unit tax through an example. Suppose that a firm is facing the price OP1. LAC1 and LMC1 are the long run average cost curve and long run marginal cost curve respectively. Also assume that the government has imposed a unit tax of Rs k per unit of output produced. Now, this will rise the firm's LAC and LMC, as the firm needs to pay Rs k extra on each output produced. Consequently, LMC1 and LAC1 will shift leftward upwards to LMC2n and LAC2. The magnitude of shift is equal to Rs k. As the supply curve is a part of LMC, it will also shift leftward from S1 to S2 , due to the imposition of the tax. Consequently, the firm will now supply lesser units of output.
More Questions From Class 12 Micro Economics - Chapter The Theory of the Firm under Perfect Competition
- Q:-
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.
- Q:-
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?
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What is the supply curve of a firm in the long run?
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What is the relation between market price and average revenue of a price-taking firm?
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What is the relation between market price and marginal revenue of a price-taking firm?
- Q:-
How does an increase in the number of firms in a market affect the market supply curve?
- Q:-
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 - Q:-
How does an increase in the price of an input affect the supply curve of a firm?
- Q:-
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.
- Q:-
Will a profit-maximising firm in a competitive market produce a positive level of output in the short run if the market price is less than the minimum of AVC? Give an explanation.
Popular Questions of Class 12 Micro Economics
- Q:-
Explain the concept of a production function
- Q:-
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?
- Q:-
Explain market equilibrium.
- Q:-
Discuss the central problems of an economy.
- Q:-
What do you mean by the budget set of a consumer?
- Q:-
What is the total product of input?
- Q:-
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
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- Q:-
When do we say that there is an excess demand for a commodity in the market?
- Q:-
What do you mean by the production possibilities of an economy?
- Q:-
What is budget line?
Recently Viewed Questions of Class 12 Micro Economics
- Q:-
What is meant by prices being rigid? How can oligopoly behavior lead to such an outcome?
- Q:-
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.
- Q:-
A consumer wants to consume two goods. The prices of the two goods are Rs 4
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(i) Write down the equation of the budget line.
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income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4. - Q:-
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- Q:-
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- Q:-
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.
- Q:-
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Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2
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respectively. How much is the consumer’s income? - Q:-
At which point does the SMC curve intersect the SAC curve? Give a reason in support of your answer.
- Q:-
What are the total fixed cost, total variable cost and total cost of a firm? How are they related?
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