Class 12 Micro Economics - Chapter The Theory of the Firm under Perfect Competition NCERT Solutions | How does an increase in the price of an

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?

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.

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.

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.

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:

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?

Consider the demand curve D (p) = 10 – 3p. What is the elasticity at price 53?

Distinguish between a centrally planned economy and a market economy.

Suppose a consumer’s preferences are monotonic. What can you say about her preference ranking over the bundles (10, 10), (10, 9) and (9, 9)?

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?

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.

Let the production function of a firm be Q=5L1/2K1/2Q=5L1/2K1/2 Find out the maximum possible output that the firm can produce with 100 units of LL and 100 units of KK.

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

When does a production function satisfy decreasing returns to scale? 

Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?

Explain how price is determined in a perfectly competitive market with a fixed number of firms.