Class 12 Micro Economics - Chapter The Theory of the Firm under Perfect Competition NCERT Solutions | What is the supply curve of a firm in th
What is the supply curve of a firm in the short run?
The short run supply curve of perfect competitive firm is the summation of the upward sloping portion of SMC (above the minimum point of SAVC) where price min SAVC and vertical portion of price axis when price min SAVC.
Stage 1
When the price is greater than or equal to minimum of SAVC i.e, P min SAVC.
At the market price OP the three following conditions for equilibrium are fulfilled:
1. MC = MR
2. MC is upward sloping
3. Price exceeds the minimum of SAVC
At this market price the firm is producing profit maximising output Oq1,
In this case the supply curve of the firm is regarded as the upward sloping part of SMC (above the minimum point of SAVC) i.e SS. When the price is greater than or equal to minimum of SAVC the supply curve is indicted by SS.
Stage 2
When the price is less than the minimum of SAVC
Let us suppose that the firm is facing price OP1 that is lesser than the minimum of SAVC. At this price the firm cannot continue production as it cannot even cover up its variable costs and thereby incurs losses which implies that the firm would produce nothing. Thus it will incur loss that will be equivalent to its fixed costs. It will be lesser compared to the losses associated with producing any positive output level thus the firm will not produce anything at this price and thereby the quantity supplied will be zero. The firms supply curve is indicated by the darkened vertical lines S1S1.
More Questions From Class 12 Micro Economics - Chapter The Theory of the Firm under Perfect Competition
- Q:-
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.
- Q:-
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?
- Q:-
How does the imposition of a unit tax affect the supply curve of a firm?
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What is the supply curve of a firm in the long run?
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What is the relation between market price and average revenue of a price-taking firm?
- Q:-
What is the relation between market price and marginal revenue of a price-taking firm?
- Q:-
How does an increase in the number of firms in a market affect the market supply curve?
- Q:-
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.
Quantity Sold TR MR AR 0
1
2
3
4
5
6 - Q:-
How does an increase in the price of an input affect the supply curve of a firm?
- Q:-
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.
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From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
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Marginal
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