List the three different ways in which oligopoly firms may have.
Oligopoly firms may behave in the following three ways:
1) Cartel - In order to avoid undue competition, oligopolistic firms may engage in formal agreements or contracts. This will not only allow them to maximise their total profits together, but also capture a significant market portion.
2) Informal understanding - Each firm may decide on its own, how much units of output are to be produced for maximising its individual profit, assuming that other firms would not change their strategies and decisions regarding the units of output to be produced.
3) Advertisement and differentiated product - It may happen that the firms realise that price competition will leave them nowhere and consequently they emphasise more on advertising their products. It will enable them to capture the minds of consumers and indirectly increase their market portion.
What is the supply curve of a firm in the long run?
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?
Distinguish between a centrally planned economy and a market economy.
How does the imposition of a unit tax affect the supply curve of a firm?
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.
What is the relation between market price and average revenue of a price-taking firm?
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.
Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?
What is the relation between market price and average revenue of a price-taking firm?
How do the equilibrium price and the quantity of a commodity change when the price of input used in its production changes?
Consider a market with two firms. The following table shows the supply schedules of the two firms: the SS1 column gives the supply schedule of firm 1 and the SS2 column gives the supply schedule of firm 2. Compute the market supply schedule.
Price (Rs.) | SS1 (units) | SS2 (units) |
---|---|---|
0 1 2 3 4 5 6 |
0 0 0 1 2 3 4 |
0 0 0 1 2 3 4 |
How does technological progress affect the supply curve of a firm?
How does the imposition of a unit tax affect the supply curve of a firm?
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.
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?
What conditions must hold if a profit-maximising firm produces positive output in a competitive market?
What do you understand by normative economic analysis?