Can there be a positive level of output | Class 12 Micro Economics Chapter The Theory of the Firm under Perfect Competition, The Theory of the Firm under Perfect Competition NCERT Solutions

Welcome to the NCERT Solutions for Class 12 Micro Economics - Chapter The Theory of the Firm under Perfect Competition. This page offers a step-by-step solution to the specific question from Exercise 1, Question 8: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.

Question 8:

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.

Answer:

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.

Other Questions of Chapter The Theory of the Firm under Perfect Competition

What is the ‘price line’?

What does the price elasticity of supply mean? How do we measure it?

How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?

What is the supply curve of a firm in the long run?

What is the relation between market price and marginal revenue of a price-taking firm?

What is the supply curve of a firm in the short run?

The following table shows the total cost schedule of a competitive firm. It is given that the price of the good is Rs 10. Calculate the profit at each output level. Find the profit maximising level of output.

Output	TC (Rs.)
0 1 2 3 4 5 6 7 8 9 10	5 15 22 27 31 38 49 63 81 101 123

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.

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.

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.

Popular questions of class 12 Micro Economics

Distinguish between a centrally planned economy and a market economy.

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.

How will a change in the price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.

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

What is the total product of input?

What is budget line?

Suppose there are 20 consumers for a good and they have identical demand functions:

d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.

List the three different ways in which oligopoly firms may have.

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

Explain why the budget line is downward sloping.

Recently Viewed Questions of Class 12 Micro Economics

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

What is a production possibility frontier?

Distinguish between microeconomics and macroeconomics.

What do you understand by normative economic analysis?

What do you understand by positive economic analysis?

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

What do the short-run marginal cost, average variable cost and short-run average cost curves look like?

How does the budget line change if the price of good 2 decreases by a rupee
but the price of good 1 and the consumer’s income remain unchanged?

If a consumer has monotonic preferences, can she be indifferent between the
bundles (10, 8) and (8, 6)?

Suppose the price elasticity of demand for a good is – 0.2. How will the expenditure on the good be affected if there is a 10 % increase in the price of the good?

Study Tips for Answering NCERT Questions:

NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:

Read the question carefully and focus on the core concept being asked.
Reference examples and data from the chapter when answering questions about The Theory of the Firm under Perfect Competition.
Review previous year question papers to get an idea of how such questions may be framed in exams.
Practice answering questions within the time limit to improve your speed and accuracy.
Discuss your answers with your teachers or peers to get feedback and improve your understanding.

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