Class 12 Micro Economics - Chapter The Theory of the Firm under Perfect Competition NCERT Solutions | Consider a market with two firms. The fo

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.

How does an increase in the price of an input affect the supply curve of a firm?

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:

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?

Explain the concept of a production function

What do you mean by complements? Give examples of two goods which are complements of each other.

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?

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)?

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.

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

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

A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
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.

Explain market equilibrium.

What is the reason for the long run equilibrium of a firm in monopolistic competition to be associated with zero profit?