Please refer to The Theory of the Firm Under Perfect Competition Class 12 Economics Important Questions with solutions provided below. These questions and answers have been provided for Class 12 Economics based on the latest syllabus and examination guidelines issued by CBSE, NCERT, and KVS. Students should learn these problem solutions as it will help them to gain more marks in examinations. We have provided Important Questions for Class 12 Economics for all chapters in your book. These Board exam questions have been designed by expert teachers of Standard 12.
Class 12 Economics Important Questions The Theory of the Firm Under Perfect Competition
MCQs
Question. What are the conditions for the long run equilibrium of the competitive firm?
a) P=MR
b) LMC = LAC=P
c) SMC=SAC=LMC
d) All of the above
Answer
B
Question. Globalization has made Indian Market as?
a) Buyer market
b) Monopsony market
c) Seller market
d) Monopoly market
Answer
A
Very Short Answer Type Questions
Question. What is oligopoly?
Answer : Oligopoly is defined as a market structure in which there are few large sellers who sell either homogenous or differentiated goods.
Question. Define perfect competition
Answer : Perfect competition is a market with large number of buyers and sellers, selling homogeneous product at same price.
Question. What is the shape of marginal revenue curve under monopoly?
Answer : Under monopoly market, marginal revenue cuve is downwards sloping from left to right and it
Short /Long Answer Type Questions
Question. Explain, how technological progress is a determinant of supply of a good by a firm.
Answer : Technological progress tends to lower the Marginal and Average Costs of production, because better technology facilitates higher output with the same inputs. Accordingly, producers are willing to supply more at the existing price, as a result, supply of producer increases.
Question. Explain how changes in prices of other products influence the supply of a given product.
Answer : As resources have alternative uses, the quantity supplied of a commodity depends not only on its price, but also on the prices of other commodities.
Increase in the prices of substitute goods makes them more profitable in comparison to the given commodity. As a result, the firm shifts its limited resources from production of the given commodity to production of other goods. e.g. increase in the price of wheat will induce the farmer to use land for cultivation of wheat in place of rice.
Decrease in price of substitute good will shift the supply curve to the right and vice-versa.
In case of complementary goods, if price of one good increases, then supply of its complementary good also increases, conveying a direct relationship. So, rise in the price of car, will cause the supply of petrol to also rise and the supply curve shifts to the rightward ad vice-versa.
Question. A firm supplies 10 units of a good at a price of Rs 5 per unit. Price Elasticity of Supply is 1.25. What quantity will the firm supply at a price of Rs 7 per unit?
Answer : Given, Es = 1.25, P = Rs 5
P1 = Rs 7, Q=10
Q1 =?,
ΔP = P1 − P = 7 – 5 = 2
Price Elasticity of Supply (Es ) = ΔQ / ΔP × P / Q
1.25 = ΔQ / 2 × 5 / 10 = ΔQ = 1.25 × 4 = 5
Q1 = Actual Quantity + Change in Quantity
= Q+ ΔQ = 10 + 5
Q1 =15 units
