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?
- Q:-
What is the supply curve of a firm in the long run?
- Q:-
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:-
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.
Popular Questions of Class 12 Micro Economics
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Explain the concept of a production function
- 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.
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Discuss the central problems of an economy.
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What do you mean by the budget set of a consumer?
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What is the total product of input?
- 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?
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Recently Viewed Questions of Class 12 Micro Economics
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If the price of a substitute Y of good X increases, what impact does it have on the equilibrium price and quantity of good X?
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Explain price elasticity of demand.
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What will happen if the price prevailing in the market is?
i. Above the equilibrium price
Ii. Below the equilibrium price
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Suppose the market determined rent for apartments is too high for common people to afford. If the government comes forward to help those seeking apartments on rent by imposing control on rent, what impact will it have on the market for apartments?
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Suppose the demand and supply curves of salt are given by:
(a) Find the equilibrium price and quantity.
(b) Now, suppose that the price of an input that used to produce salt has increased so, that the new supply curve is qs = 400 + 3p
How does the equilibrium price and quantity change? Does the change conform to your expectation?
(a) Suppose the government has imposed at ax of Rs 3 per unit of sale on salt. How does it affect the equilibrium rice quantity?
- Q:-
Will the monopolist firm continue to produce in the short run if a loss is incurred at the best short run level of output?
- Q:-
When does a production function satisfy decreasing returns to scale?
- Q:-
If the monopolist firm of Exercise 3 was a public sector firm. The government set a rule for its manager to accept the government fixed price as given (i.e. to be a price taker and therefore behave as a firm in a perfectly competitive market). And the government has decided to set the price so that demand and supply in the market are equal. What would be the equilibrium price, quantity and profit in this case?
- Q:-
What do the long-run marginal cost and the average cost curves look like?
- Q:-
A monopoly firm has a total fixed cost of Rs 100 and has the following demand schedule:
Quantity
1
2
3
4
5
6
7
8
9
10
Marginal
Revenue
100
90
80
70
60
50
40
30
20
10
Find the short run equilibrium quantity, price and total profit. What would be the equilibrium in the long run? In case the total cost is Rs.1000, describe the equilibrium in the short run and in the long run.
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