Class 12 Micro Economics - Chapter Production and Costs NCERT Solutions | What does the average fixed cost curve l
What does the average fixed cost curve look like? Why does it look so?
The short run marginal cost (SMC), average variable cost (AVC) and short run average cost (SAC) curves are all U-shaped curves. The reason behind the curves being U-shaped is the law of variable proportion. In the initial stages of production in the short run, due to increasing returns to labour, all the costs (average and marginal) fall. In addition to this in the short run MP of labour also increases, which implies that more output can be produced by per additional unit of labour, leading all the costs curves to fall. Subsequently with the advent of constant returns to labour, the cost curves become constant and reach their minimum point (representing the optimum combination of capital and labour). Beyond this optimum combination, additional units of labour increase the cost, and as MP of labour starts falling, the cost curve starts rising due to decreasing returns to labour.
More Questions From Class 12 Micro Economics - Chapter Production and Costs
- Q:-
What is the total product of input?
- Q:-
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.
- Q:-
When does a production function satisfy decreasing returns to scale?
- Q:-
Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve?
- Q:-
What do the long-run marginal cost and the average cost curves look like?
- Q:-
Explain the relationship between the marginal products and the total product of an input.
- Q:-
Why is the short-run marginal cost curve 'U'-shaped?
- Q:-
What is the law of variable proportions?
- Q:-
The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.
- Q:-
What are the average fixed cost, average variable cost and average cost of a firm? How are they related?
Popular Questions of Class 12 Micro Economics
- 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 are the characteristics of a perfectly competitive market?
- Q:-
What do you mean by the budget set of a consumer?
- 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
-
- 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:-
How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
- Q:-
What is budget line?
Recently Viewed Questions of Class 12 Micro Economics
- Q:-
Comment on the shape of MR curve in case when TR curve is a
(a) Positively sloped straight line
(b) Horizontal straight line
- Q:-
What do you mean by an ‘inferior good’? Give some examples
- Q:-
Discuss the subject matter of economics.
- Q:-
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. - Q:-
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.
- Q:-
At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 30. The price elasticity of the firm’s supply is 1.25. What quantity will the firm supply at the new price?
- 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.
- Q:-
What do you mean by the budget set of a consumer?
- Q:-
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
60
0
0
1
2
3
40
0
0
1
2
3
4 - Q:-
What is the ‘price line’?
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