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The Theory of the Firm under Perfect Competition
What is the supply curve of a firm in the long run?

What is the supply curve of a firm in th | Class 12 Micro Economics Chapter The Theory of the Firm under Perfect Competition, The Theory of the Firm under Perfect Competition NCERT Solutions

Question:

What is the supply curve of a firm in the long run?

Answer:

In the long run as there is no fixed cost the perfectly competitive firms supply will be the summation of the upward sloping portion of SMC above the minimum point of LAC (When price minimum LAC) and the vertical portion of the price axis (when price minimum of LAC) the long run supply curve of a perfect competitive firm is derived in two stages.

1. When price is equal to the minimum of LAC:

Let us suppose that the firm is facing market price OP that exceeds the minimum of LAC. MC is equal to MR (at point E) and MC is positively sloped at this point of intersection. Also the price is greater than the
minimum of LAC. Thus the firm is at long run equilibrium facing the price OP and producing Oq1 units of output. The supply curve is SS represented by the upward portion of LMC above the minimum of LAC.

2. When the price is less than the minimum of LAC:
Let us suppose that the market price faced by a firm is OP1 which is less than the minimum of LAC. at this price the firm would not produce any output because
producing any output will lead therefore the firm would not produce anything so the supply curve of the firm in the long run for the price less than the minimum of LAC is
given S1S1 and is represented by the darkened vertical part of the price axis.

Combining 1 st and 2 nd stages the firms long run supply curve under perfect competition is given by (S1S1 + SS).

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Popular questions of class 12 Micro Economics

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?

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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
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that good?
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Questions 5, 6 and 7 are related to question 4.

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What happens to the budget set if both the prices as well as the income double?

What do you mean by ‘monotonic preferences’?

In what respect do the supply and demand curves in the labor market differ from those in the goods market?

Explain market equilibrium.

What will happen if the price prevailing in the market is?

i. Above the equilibrium price

Ii. Below the equilibrium price

The market demand curve for a commodity and the total cost for a monopoly firm producing the commodity are given in the schedules below.

Quantity	0	1	2	3	4	5	6	7	8
Price	52	44	37	31	26	22	19	16	13

Quantity	0	1	2	3	4	5	6	7	8
Price	10	60	90	100	102	105	109	115	125

Use the information given to calculate the following:

(a) The MIR and MC schedules

(b) The quantities for which MIR and MC are equal

(c) The equilibrium quantity of output and the equilibrium price of the commodity

(d) The total revenue, total cost and total profit in the equilibrium

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.

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Welcome to the NCERT Solutions for Class 12 Micro Economics - Chapter . This page offers a step-by-step solution to the specific question from Excercise 1 , Question 13: What is the supply curve of a firm in the long run?....

What is the supply curve of a firm in th | Class 12 Micro Economics Chapter The Theory of the Firm under Perfect Competition, The Theory of the Firm under Perfect Competition NCERT Solutions

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