NCERT Solution
Class 12
Micro Economics
The Theory of the Firm under Perfect Competition
can there be a positive level of output that a pro...

Question:
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.

Answer:

There cannot be any positive level of output that a firm producers at which price is not equal to MC. Let us evaluate the following two cases where price is not equal to MC.

Case A: If P MC
At output Oq1, price is Kq1 while the MC is Lq1. So Oq1 is not the profit maximising output. This is due to the fact that the firm can increase its profit level by expanding its output to Oq2.

Case B: If P
At output Oq3 price is Hq3 and MC is Gq3 . so Oq3 is not the profit maximising output . this is because the firm can increase its profit by reducing its output level to Oq2. Thus at profit maximising point price must be equal to MC and it cannot be greater or lesser than MC.

1
0
0
Report?

Report a problem on Specifications:

Email id:

Comments

< Previous Question

Next Question >

SELECT ex_no,question,question_no,id,chapter FROM question_mgmt as q WHERE courseId='3' AND subId='60' AND ex_no!=0 AND status=1 and id!=5552 ORDER BY views desc, last_viewed_on desc limit 0,10

Popular questions of class 12 Micro Economics

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?

How does the imposition of a unit tax affect the supply curve of a firm?

Distinguish between a centrally planned economy and a market economy.

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 budget line?

Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?

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.

What is the total product of input?

SELECT ex_no,question,question_no,id,chapter FROM question_mgmt as q WHERE courseId='3' AND subId='60' AND ex_no!=0 AND status=1 and id!=5552 ORDER BY last_viewed_on desc limit 0,10

Recently Viewed Questions of Class 12 Micro Economics

Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2
if she spends her entire income. The prices of the two goods are Rs 6 and Rs 8
respectively. How much is the consumer’s income?

What does the price elasticity of supply mean? How do we measure it?

From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:

Quantity

Marginal

Revenue

If a consumer has monotonic preferences, can she be indifferent between the
bundles (10, 8) and (8, 6)?

When does a production function satisfy increasing returns to scale?

The following table shows the total cost schedule of a firm. What is the total fixed cost schedule of this firm? Calculate the TVC, AFC, AVC, SAC and SMC schedules of the firm.

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

i. Above the equilibrium price

Ii. Below the equilibrium price

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?

How does an increase in the number of firms in a market affect the market supply curve?

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.

Question:
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.

< Previous Question

Next Question >

Popular questions of class 12 Micro Economics

Recently Viewed Questions of Class 12 Micro Economics

Comments

Comment(s) on this Question

NCERT Solutions

Quick Links

Resources

Support

Question: 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.

< Previous Question

Next Question >

Popular questions of class 12 Micro Economics

Recently Viewed Questions of Class 12 Micro Economics

Comments

Comment(s) on this Question

NCERT Solutions

Quick Links

Resources

Support

Question:
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.