What is the relation between market price and marginal revenue of a price-taking firm?
Marginal revenue is defined as the change in the total revenue that occurs due to the sale of one more unit of output. It is calculated as
MRn= TRn – TRn-1
Where
MRn = Marginal revenue due to nth unit of output
TRn = Total revenue due to n units of output
TRn-1 = Total revenue due to n units of output
TRn-1 = Total revenue due to (n-1) units of output
Suppose that the market price is P
MRn = TRn - TRn-1
= PQn – P (Qn – 1)
MR = PQn – PQn+P
MR = P
Thus for a perfect competitive firm marginal revenue is equal to the market price per unit of output.
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 do you mean by the production possibilities of an economy?
Explain why the demand curve facing a firm under monopolistic competition is negatively sloped.
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?
What is the value of the MR when the demand curve is elastic?
Will a profit-maximising firm in a competitive market produce a positive level of output in the long run if the market price is less than the minimum of AC? Give an explanation.
Suppose the demand and supply curve of commodity XX in a perfectly competitive market are given by:
qD =700 - p
qs = 500 + 3p for p ≥ 15
= 0 or 0 ≤ p <15
Assume that the market consists of identical firms. Identify the reason behind the market supply of commodity X being zero at any price less than Rs 15. What will be the equilibrium price for this commodity? At equilibrium, what quantity of X will be produced?
List the three different ways in which oligopoly firms may have.
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 |