NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition
Get here NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition.
More Detail
Latest News
Finished viewing? Save it for later —
Download NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition (PDF · 20 pages)Downloaded 70 times
About NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition
NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition is available here for free download. Published by NCERT for Class 12, this solution can be viewed online or downloaded as a PDF (20 pages). Candidates preparing for Class 12 can use NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition to understand the exam pattern, the type of questions asked, and the overall difficulty level.
Frequently Asked Questions
How can I download NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition?
Open this page and click the Download button to save NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition as a PDF. It is completely free on AglaSem Docs.
Is NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition free to download?
Yes. NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition can be viewed online and downloaded as a PDF free of cost on AglaSem Docs.
How many pages does NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition have?
NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition contains 20 pages, which you can read online or download together as a single PDF.
Where can I find more Class 12 study material?
You can find more Class 12 question papers, sample papers, syllabus, and answer keys on AglaSem Docs.
NCERT Solutions for Class 12 Economics (Microeconomics) Chapter 4 The Theory of the Firm under Perfect Competition – Text
Read the full text of this solution below — useful to quickly search, copy and reference the content online without downloading the PDF.
📄 View text version (20 pages)
Page 1
NCERT
SOLUTIONS
CLASS - 12th
aglase .co
SOLUTIONS
CLASS - 12th
aglase .co
Page 2
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Class : 12th
Subject : Economics
Chapter : 4
Chapter Name : The Theory of the Firm under Perfect Competition
Q1 What are the characteristics of a perfectly competitive market?
Answer. Perfectly competitive market refers to the market which consist of large number of
buyers and sellers selling a homogeneous product.
Characteristics of a perfectly competitive market are-
i) No of buyers and sellers: There exists a large number of buyers and sellers in the market.
ii) Nature of product: The product bought and sold is absolutely homogeneous in nature.
iii) Free entry and exit: There exists free entry and exit of the sellers in the market.
iv) Price: The price of commodity is pre-determined in the market. Neither the buyer nor the
seller can influence the price. Hence it is a price taker firm.
v) Profit: The producer of this type of market earn only normal profit.The firm under this type of
market earn only normal profit.
vii) Knowledge of the market: Both buyers and sellers have perfect knowledge about the price
and quantity of product bought and sold in the market.
Page : 67 , Block Name : Exercises
Q2 How is the total revenue of the firm, market price and the quantity sold by the firm related to
each other?
Answer. Total revenue is the income generated from sales of the product at a particular price in
the market during a particular period of time. Thus revenue is the product of price of the
commodity and output sold.
Page 1 of 19
Class : 12th
Subject : Economics
Chapter : 4
Chapter Name : The Theory of the Firm under Perfect Competition
Q1 What are the characteristics of a perfectly competitive market?
Answer. Perfectly competitive market refers to the market which consist of large number of
buyers and sellers selling a homogeneous product.
Characteristics of a perfectly competitive market are-
i) No of buyers and sellers: There exists a large number of buyers and sellers in the market.
ii) Nature of product: The product bought and sold is absolutely homogeneous in nature.
iii) Free entry and exit: There exists free entry and exit of the sellers in the market.
iv) Price: The price of commodity is pre-determined in the market. Neither the buyer nor the
seller can influence the price. Hence it is a price taker firm.
v) Profit: The producer of this type of market earn only normal profit.The firm under this type of
market earn only normal profit.
vii) Knowledge of the market: Both buyers and sellers have perfect knowledge about the price
and quantity of product bought and sold in the market.
Page : 67 , Block Name : Exercises
Q2 How is the total revenue of the firm, market price and the quantity sold by the firm related to
each other?
Answer. Total revenue is the income generated from sales of the product at a particular price in
the market during a particular period of time. Thus revenue is the product of price of the
commodity and output sold.
Page 1 of 19
Page 3
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Page : 67 , Block Name : Exercises
Q3 What is the price line?
Answer. For a perfectly competitive market, it is a horizontal line that represents the market
price for the firm. Here, in the graph the price line and demand curve are same. Thus AR =D is
the price line.
Price line is the line that represents the market price of the goods of the firm.
Image source - NCERT
Page : 67 , Block Name : Exercises
Page 2 of 19
Page : 67 , Block Name : Exercises
Q3 What is the price line?
Answer. For a perfectly competitive market, it is a horizontal line that represents the market
price for the firm. Here, in the graph the price line and demand curve are same. Thus AR =D is
the price line.
Price line is the line that represents the market price of the goods of the firm.
Image source - NCERT
Page : 67 , Block Name : Exercises
Page 2 of 19
Page 4
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Q4 Why is the total revenue curve of a price taking firm an upward sloping straight line? Why
does curve pass through the origin?
Answer. Total revenue is the income generated from sales of the product at particular price in
the market during a particular period of time. It is the product of market price and output sold.
Consider the table below:
Untis of Q P AR MR
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
● Here, we note that the units sold goes on increasing, price remaining constant for a
perfectly competitive firm.
● Thus AR and MR which is equal to price remains the same.
● With price remaining constant total revenue goes on increasing and is upward sloping
straight line because the slope of the cuve remains constant.
● When units sold is zero, total revenue is also zero thus it passes form origin.
Image source - NCERT
Page : 67 , Block Name : Exercises
Q5 What is the relation between market price and average revenue of a price taking firm?
Answer. Average revenue is the ratio of total revenue to quantity sold i.e.
Page 3 of 19
Q4 Why is the total revenue curve of a price taking firm an upward sloping straight line? Why
does curve pass through the origin?
Answer. Total revenue is the income generated from sales of the product at particular price in
the market during a particular period of time. It is the product of market price and output sold.
Consider the table below:
Untis of Q P AR MR
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
● Here, we note that the units sold goes on increasing, price remaining constant for a
perfectly competitive firm.
● Thus AR and MR which is equal to price remains the same.
● With price remaining constant total revenue goes on increasing and is upward sloping
straight line because the slope of the cuve remains constant.
● When units sold is zero, total revenue is also zero thus it passes form origin.
Image source - NCERT
Page : 67 , Block Name : Exercises
Q5 What is the relation between market price and average revenue of a price taking firm?
Answer. Average revenue is the ratio of total revenue to quantity sold i.e.
Page 3 of 19
Page 5
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Thus, AR=P; Average revenue is equal to Market Price.
Page : 68 , Block Name : Exercises
Q6 What is the relation between market price and marginal revenue of a price taking firm.
Answer. Marginal revenue is the change in total revenue due to additional unit of output sold.
For a price taking firm market price is equal to marginal revenue because firm can sell more unit
of goods at same price. As a result, marginal revenue is equal to average revenue or price.
Units Q P TR AR MR
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
Page : 68 , Block Name : Exercises
Q7 What conditions must hold if a profit maximum firm produces positive output in a competitive
market?
Answer. There are two conditions that profit maximizing firm should hold if it produces a positive
output in a competitive market -
i) Marginal Revenue must be equal to Marginal Cost i.e. MR=MC
ii) Marginal cost curve intersects MR curve from below.
Page 4 of 19
Thus, AR=P; Average revenue is equal to Market Price.
Page : 68 , Block Name : Exercises
Q6 What is the relation between market price and marginal revenue of a price taking firm.
Answer. Marginal revenue is the change in total revenue due to additional unit of output sold.
For a price taking firm market price is equal to marginal revenue because firm can sell more unit
of goods at same price. As a result, marginal revenue is equal to average revenue or price.
Units Q P TR AR MR
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
Page : 68 , Block Name : Exercises
Q7 What conditions must hold if a profit maximum firm produces positive output in a competitive
market?
Answer. There are two conditions that profit maximizing firm should hold if it produces a positive
output in a competitive market -
i) Marginal Revenue must be equal to Marginal Cost i.e. MR=MC
ii) Marginal cost curve intersects MR curve from below.
Page 4 of 19
Page 6
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Image source - NCERT
● According to the graph, first condition i.e. equality of MR and MC is evident at point A
and B. Since two points cannot be equilibrium points. It is important that the second
condition is also fulfilled.
● Beyond point A in graph, it is evident that MR>MC indicating profit for producer. The
producer earns profit till point B.
● Again at point B, MR=MC and there is no profit no loss situation.
● Beyond B, if producer produces, MC becomes more than MR. Thus producer will incur
loss.
● So he will stop at point B where both conditions are fulfilled i.e. MR=MC and MC curve
intersects MR curve from below.
Page : 68 , Block Name : Exercises
Q8 Can there be positive level of output that a profit maximizing firm produces in a competitive
market in which market price is not equal to marginal cost. Give an explanation.
Answer. No, a firm cannot produce at a point where market price is not equal to marginal cost
because it is a necessary condition for a perfectly competitive firm that MR should be equal to
MC in order to be in equilibrium.
If a firm produces at a situation where MR is more than MC , he will earn super profits and
hence will continue production. Gradually MC will go on increasing and point will reach where
MR becomes equal to MC.
If firm further continues to produce, MC will be more than MR and firm will incur loss. So firm will
stop at the point where MC was equal to MR.
Page 5 of 19
Image source - NCERT
● According to the graph, first condition i.e. equality of MR and MC is evident at point A
and B. Since two points cannot be equilibrium points. It is important that the second
condition is also fulfilled.
● Beyond point A in graph, it is evident that MR>MC indicating profit for producer. The
producer earns profit till point B.
● Again at point B, MR=MC and there is no profit no loss situation.
● Beyond B, if producer produces, MC becomes more than MR. Thus producer will incur
loss.
● So he will stop at point B where both conditions are fulfilled i.e. MR=MC and MC curve
intersects MR curve from below.
Page : 68 , Block Name : Exercises
Q8 Can there be positive level of output that a profit maximizing firm produces in a competitive
market in which market price is not equal to marginal cost. Give an explanation.
Answer. No, a firm cannot produce at a point where market price is not equal to marginal cost
because it is a necessary condition for a perfectly competitive firm that MR should be equal to
MC in order to be in equilibrium.
If a firm produces at a situation where MR is more than MC , he will earn super profits and
hence will continue production. Gradually MC will go on increasing and point will reach where
MR becomes equal to MC.
If firm further continues to produce, MC will be more than MR and firm will incur loss. So firm will
stop at the point where MC was equal to MR.
Page 5 of 19
Page 7
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Thus we see that a profit maximizing firm can not produce at point where MC is not equal to
MR.
Page : 68 , Block Name : Exercises
Q9 Will a profit maximizing firm in a competitive market ever produces a positive level of output
in the range where the marginal cost is falling? Give an explanation.
Answer. No, a profit maximizing firm in a competitive market will never produce when marginal
cost is falling because in this situation the second order condition i.e. MR curve should intersect
MR curve from below is not fulfilled. So, profit maximizing firm will produce at that quantity of
output at which MC is rising and intersecting MR curve.
Image source - NCERT
Let us understand this with the above graph:
At point A, MR= MC but MC is falling and let say quantity produced at point A is q1. Now as
producer produces more than q1 level of output MR becomes greater than MC which motivates
to produce more as profit is maximized by increasing the level of output.
Now the producer reaches B level of output which is the equilibrium point. The producer won't
produce further as it will result in MC greater than MR incurring loss. Hence at this point, profit is
maximized where MC is rising.
Page : 68 , Block Name : Exercises
Page 6 of 19
Thus we see that a profit maximizing firm can not produce at point where MC is not equal to
MR.
Page : 68 , Block Name : Exercises
Q9 Will a profit maximizing firm in a competitive market ever produces a positive level of output
in the range where the marginal cost is falling? Give an explanation.
Answer. No, a profit maximizing firm in a competitive market will never produce when marginal
cost is falling because in this situation the second order condition i.e. MR curve should intersect
MR curve from below is not fulfilled. So, profit maximizing firm will produce at that quantity of
output at which MC is rising and intersecting MR curve.
Image source - NCERT
Let us understand this with the above graph:
At point A, MR= MC but MC is falling and let say quantity produced at point A is q1. Now as
producer produces more than q1 level of output MR becomes greater than MC which motivates
to produce more as profit is maximized by increasing the level of output.
Now the producer reaches B level of output which is the equilibrium point. The producer won't
produce further as it will result in MC greater than MR incurring loss. Hence at this point, profit is
maximized where MC is rising.
Page : 68 , Block Name : Exercises
Page 6 of 19
Page 8
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Q10 Will a profit maximizing firm in a competitive market produce a positive level of output in the
short run if market price is less than the minimum of AVC? Give an explanation.
Answer. No, a competitive market will not produce a positive level of output in the short run if
market price is less than the minimum of AVC. This is because the point where market price is
equal to the minimum point of AVC indicates shutdown point for the firm and a firm will never
operate at a price less than minimum AVC.
Image source - NCERT
At price P and quantity q1,
TR = OP X Oq1, which is represented by the OPAq1
TC = AVC X Oq1 = OE X Oq1, which is represented by the Oq1BE
Profit = TR – TC = OPAq1 - Oq1BE
As we can see
TC > TR, so there is loss, which is represented by PABE.
Thus the firm shall stop production whenever Price or AR < AVC
In short run, at profit maximising level, AC > AVC
Page : 68 , Block Name : Exercises
Page 7 of 19
Q10 Will a profit maximizing firm in a competitive market produce a positive level of output in the
short run if market price is less than the minimum of AVC? Give an explanation.
Answer. No, a competitive market will not produce a positive level of output in the short run if
market price is less than the minimum of AVC. This is because the point where market price is
equal to the minimum point of AVC indicates shutdown point for the firm and a firm will never
operate at a price less than minimum AVC.
Image source - NCERT
At price P and quantity q1,
TR = OP X Oq1, which is represented by the OPAq1
TC = AVC X Oq1 = OE X Oq1, which is represented by the Oq1BE
Profit = TR – TC = OPAq1 - Oq1BE
As we can see
TC > TR, so there is loss, which is represented by PABE.
Thus the firm shall stop production whenever Price or AR < AVC
In short run, at profit maximising level, AC > AVC
Page : 68 , Block Name : Exercises
Page 7 of 19
Page 9
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Q11. Will a profit maximizing firm in a competitive market produce a positive level of output in
the long run if market price is less than the minimum of AC? Give an explanation.
Answer. No, firm in a competitive market will not produce a positive level of output in the long
run if market price is less than the minimum of AC because in such market there is free entry
and exit of firms and thus each firm earns normal profit. So firm incurring loss will stop
production and exit the market.
Image source - NCERT
The region PABE in the graph depicts the loss the firm will incur on producing goods and
services if price falls below minimum average cost in the long run.
Page : 68 , Block Name : Exercises
Q12 What is the supply curve of firm in short run?
PAnswer. A firms short run supply curve is the rising part of SMC curve from and above the
minimum AVC together with zero output for all prices strictly less than minimum AVC.
Page 8 of 19
Q11. Will a profit maximizing firm in a competitive market produce a positive level of output in
the long run if market price is less than the minimum of AC? Give an explanation.
Answer. No, firm in a competitive market will not produce a positive level of output in the long
run if market price is less than the minimum of AC because in such market there is free entry
and exit of firms and thus each firm earns normal profit. So firm incurring loss will stop
production and exit the market.
Image source - NCERT
The region PABE in the graph depicts the loss the firm will incur on producing goods and
services if price falls below minimum average cost in the long run.
Page : 68 , Block Name : Exercises
Q12 What is the supply curve of firm in short run?
PAnswer. A firms short run supply curve is the rising part of SMC curve from and above the
minimum AVC together with zero output for all prices strictly less than minimum AVC.
Page 8 of 19
Page 10
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Image source - NCERT
Page : 68 , Block Name : Exercises
Q13 What is the supply curve of the firm in long run?
Answer. A firm’s long run supply curve is the rising part of the LRMC curve from and above the
minimum LRAC together with zero output for all prices less than minimum LRAC.
Page : 68 , Block Name : Exercises
Q14 How does technological progress affects the supply curve of a firm?
Answer. Technological progress shifts the supply curve of a firm in the rightward direction.
Technological progress will lower the firms marginal cost at any level of output and MC curve
will shift rightward. As supply curve is a segment of MC curve, supply curve also shifts to the
right.
Page 9 of 19
Image source - NCERT
Page : 68 , Block Name : Exercises
Q13 What is the supply curve of the firm in long run?
Answer. A firm’s long run supply curve is the rising part of the LRMC curve from and above the
minimum LRAC together with zero output for all prices less than minimum LRAC.
Page : 68 , Block Name : Exercises
Q14 How does technological progress affects the supply curve of a firm?
Answer. Technological progress shifts the supply curve of a firm in the rightward direction.
Technological progress will lower the firms marginal cost at any level of output and MC curve
will shift rightward. As supply curve is a segment of MC curve, supply curve also shifts to the
right.
Page 9 of 19
Page 11
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Image source - NCERT
Here, let S1 be the original supply curve and due to the improvement in technology, the price
falls down to P0. So the supply curve will shift to S0.
Page : 68 , Block Name : Exercises
Q15 How does the imposition of a unit tax affect supply curve of a firm?
Answer. A unit tax is a tax that government imposes per unit sale of output. With imposition of
tax, marginal cost will increase, hence there will be a decrease in supply and supply curve will
shift towards the left.
Image source - NCERT
Here, let the S0 be the original supply curve and the unit tax imposed be t. So, the price rises to
p0 + t. The new supply curve becomes S1.
Page 10 of 19
Image source - NCERT
Here, let S1 be the original supply curve and due to the improvement in technology, the price
falls down to P0. So the supply curve will shift to S0.
Page : 68 , Block Name : Exercises
Q15 How does the imposition of a unit tax affect supply curve of a firm?
Answer. A unit tax is a tax that government imposes per unit sale of output. With imposition of
tax, marginal cost will increase, hence there will be a decrease in supply and supply curve will
shift towards the left.
Image source - NCERT
Here, let the S0 be the original supply curve and the unit tax imposed be t. So, the price rises to
p0 + t. The new supply curve becomes S1.
Page 10 of 19
Page 12
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Page : 68 , Block Name : Exercises
Q16 How does an increase in the price of an input affect the supply curve of a firm?
Answer. An increase in the price of an input will increase the marginal cost. As a result, the
profit margin of the producer will decrease. So, producer will decrease supply and supply curve
will shift to left.
Page : 68 , Block Name : Exercises
Q17 How does an increase in the number of firms in a market affect the market supply curve?
Answer. With increase in number of firms the supply will be more in the market hence supply
curve will shift in the rightward direction. When the number of firms in the market will increase,
they will contribute something in the total supply. As a result,the market supply will increase.
Page : 68 , Block Name : Exercises
Q18 What does the price elasticity of supply mean? How do we measure it?
Answer. Elasticity of supply can be defined as degree of responsiveness of quantity supplied
due to change in price.
Page 11 of 19
Page : 68 , Block Name : Exercises
Q16 How does an increase in the price of an input affect the supply curve of a firm?
Answer. An increase in the price of an input will increase the marginal cost. As a result, the
profit margin of the producer will decrease. So, producer will decrease supply and supply curve
will shift to left.
Page : 68 , Block Name : Exercises
Q17 How does an increase in the number of firms in a market affect the market supply curve?
Answer. With increase in number of firms the supply will be more in the market hence supply
curve will shift in the rightward direction. When the number of firms in the market will increase,
they will contribute something in the total supply. As a result,the market supply will increase.
Page : 68 , Block Name : Exercises
Q18 What does the price elasticity of supply mean? How do we measure it?
Answer. Elasticity of supply can be defined as degree of responsiveness of quantity supplied
due to change in price.
Page 11 of 19
Page 13
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Page : 68 , Block Name : Exercises
Q19 Compute the total revenue, marginal revenue and average revenue schedule in following
table. Market price of each unit of good in Rs. 10.
Quantity 0 1 2 3 4 5 6
Sold
Answer. MR = Price = Rs.10
AR= price = Rs.10 ;
TR = Quantity sold * price
Quantity Sold Price TR MR AR
0 10 0 10 10
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
6 10 60 10 10
Page : 68 , Block Name : Exercises
Q20 The following table shows the total revenue and total cost schedule of a competitive firm.
Calculate the profit at each level of output. Determine also the market price of goods.
Qty. 0 1 2 3 4 5 6 7
Sold
TR 0 5 10 15 20 25 30 35
TC 5 7 10 12 15 23 33 40
Answer.
Price= AR= 5
Profit= TR-TC
Units = Q TR TC AR=P = TR/Q Profit(TR - TC)
0 0 5 0 -
Page 12 of 19
Page : 68 , Block Name : Exercises
Q19 Compute the total revenue, marginal revenue and average revenue schedule in following
table. Market price of each unit of good in Rs. 10.
Quantity 0 1 2 3 4 5 6
Sold
Answer. MR = Price = Rs.10
AR= price = Rs.10 ;
TR = Quantity sold * price
Quantity Sold Price TR MR AR
0 10 0 10 10
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
6 10 60 10 10
Page : 68 , Block Name : Exercises
Q20 The following table shows the total revenue and total cost schedule of a competitive firm.
Calculate the profit at each level of output. Determine also the market price of goods.
Qty. 0 1 2 3 4 5 6 7
Sold
TR 0 5 10 15 20 25 30 35
TC 5 7 10 12 15 23 33 40
Answer.
Price= AR= 5
Profit= TR-TC
Units = Q TR TC AR=P = TR/Q Profit(TR - TC)
0 0 5 0 -
Page 12 of 19
Page 14
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
1 5 7 5 (-2)
2 10 10 5 0
3 15 12 5 3
4 20 15 5 5
5 25 23 5 2
6 30 33 5 (-3)
7 35 40 5 (-5)
Page : 68 , Block Name : Exercises
Q21 The following table shows the total cost schedule of a competitive firm. It is given that the
price of good is Rs. 10. Calculate the profit at each output level. Find the profit maximizing level
of output.
Output 0 1 2 3 4 5 6 7 8 9 10
TC 5 15 22 27 31 38 49 63 81 101 123
Answer. AR=MR=P
Profit=TR-TC
Output TC AR=P TR Profit
0 5 10 0 -
1 15 10 10 -5
2 22 10 20 -2
3 27 10 30 3
4 31 10 40 9
5 38 10 50 12
6 49 10 60 11
7 63 10 70 7
8 81 10 80 -1
9 101 10 90 -11
10 123 10 100 -23
Profit maximizing level of output is 5th unit as profit is maximum here that is 12.
Page : 69 , Block Name : Exercises
Page 13 of 19
1 5 7 5 (-2)
2 10 10 5 0
3 15 12 5 3
4 20 15 5 5
5 25 23 5 2
6 30 33 5 (-3)
7 35 40 5 (-5)
Page : 68 , Block Name : Exercises
Q21 The following table shows the total cost schedule of a competitive firm. It is given that the
price of good is Rs. 10. Calculate the profit at each output level. Find the profit maximizing level
of output.
Output 0 1 2 3 4 5 6 7 8 9 10
TC 5 15 22 27 31 38 49 63 81 101 123
Answer. AR=MR=P
Profit=TR-TC
Output TC AR=P TR Profit
0 5 10 0 -
1 15 10 10 -5
2 22 10 20 -2
3 27 10 30 3
4 31 10 40 9
5 38 10 50 12
6 49 10 60 11
7 63 10 70 7
8 81 10 80 -1
9 101 10 90 -11
10 123 10 100 -23
Profit maximizing level of output is 5th unit as profit is maximum here that is 12.
Page : 69 , Block Name : Exercises
Page 13 of 19
Page 15
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Q22 Consider market with two firms the following table shows the supply schedules of two firms
the column give the supply schedule of firm 1 and column gives supply schedule of
firm 2. Compute market supply schedule.
Price
0 0 0
1 0 0
2 0 0
3 1 1
4 2 2
5 3 3
6 4 4
Answer. S= Market Supply= +
Price S (Market Supply)
0 0 0 0
1 0 0 0
2 0 0 0
3 1 1 2
4 2 2 4
5 3 3 6
6 4 4 8
Page : 69 , Block Name : Exercises
Q23 Consider the market with two firms. In the following table column labeled as and
gives the supply schedules of firm 1 and firm 2 respectively. Compute the market schedule.
Price
0 0 0
1 0 0
2 0 0
3 1 0
4 2 0.5
5 3 1
6 4 1.5
7 5 2
8 6 2.5
Page 14 of 19
Q22 Consider market with two firms the following table shows the supply schedules of two firms
the column give the supply schedule of firm 1 and column gives supply schedule of
firm 2. Compute market supply schedule.
Price
0 0 0
1 0 0
2 0 0
3 1 1
4 2 2
5 3 3
6 4 4
Answer. S= Market Supply= +
Price S (Market Supply)
0 0 0 0
1 0 0 0
2 0 0 0
3 1 1 2
4 2 2 4
5 3 3 6
6 4 4 8
Page : 69 , Block Name : Exercises
Q23 Consider the market with two firms. In the following table column labeled as and
gives the supply schedules of firm 1 and firm 2 respectively. Compute the market schedule.
Price
0 0 0
1 0 0
2 0 0
3 1 0
4 2 0.5
5 3 1
6 4 1.5
7 5 2
8 6 2.5
Page 14 of 19
Page 16
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Answer. Market supply schedule is the summation of individual supply schedule.
S = (SS_1) + (SS_2)
Price S= +
0 0 0 0
1 0 0 0
2 0 0 0
3 1 0 1
4 2 0.5 2.5
5 3 1 4
6 4 1.5 5.5
7 5 2 7
8 6 2.5 8.5
Page : 69 , Block Name : Exercises
Q24 There are 3 identical firms in a market. The following table shows the supply schedule of
firm. Compute the market schedule.
Price 0 1 2 3 4 5 6 7 8
0 0 2 4 6 8 10 12 14
Answer. Market supply schedule is the summation of individual supply schedule.
Price S
0 0 0 0 0
1 0 0 0 0
2 2 2 2 6
3 4 4 4 12
4 6 6 6 18
5 8 8 8 24
6 10 10 10 30
7 12 12 12 36
8 14 14 14 42
Page 15 of 19
Answer. Market supply schedule is the summation of individual supply schedule.
S = (SS_1) + (SS_2)
Price S= +
0 0 0 0
1 0 0 0
2 0 0 0
3 1 0 1
4 2 0.5 2.5
5 3 1 4
6 4 1.5 5.5
7 5 2 7
8 6 2.5 8.5
Page : 69 , Block Name : Exercises
Q24 There are 3 identical firms in a market. The following table shows the supply schedule of
firm. Compute the market schedule.
Price 0 1 2 3 4 5 6 7 8
0 0 2 4 6 8 10 12 14
Answer. Market supply schedule is the summation of individual supply schedule.
Price S
0 0 0 0 0
1 0 0 0 0
2 2 2 2 6
3 4 4 4 12
4 6 6 6 18
5 8 8 8 24
6 10 10 10 30
7 12 12 12 36
8 14 14 14 42
Page 15 of 19
Page 17
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Page : 69 , Block Name : Exercises
Q25 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 earns a revenue of Rs. 150. What is the price elasticity of
the firm’s supply curve?
Answer.
Market price Revenue Quantity
10 50 5
15 150 10
Therefore,
Therefore,
.
Price elasticity of supply is 2.
Page : 70 , Block Name : Exercises
Page 16 of 19
Page : 69 , Block Name : Exercises
Q25 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 earns a revenue of Rs. 150. What is the price elasticity of
the firm’s supply curve?
Answer.
Market price Revenue Quantity
10 50 5
15 150 10
Therefore,
Therefore,
.
Price elasticity of supply is 2.
Page : 70 , Block Name : Exercises
Page 16 of 19
Page 18
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Q26 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 initial
and final output level of firm?
Answer.
Market price Supply
5 S
20 S + 15
Therefore,
Now,
Initial output is 10 units and Final output is 25 units.
Page : 70 , Block Name : Exercises
Page 17 of 19
Q26 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 initial
and final output level of firm?
Answer.
Market price Supply
5 S
20 S + 15
Therefore,
Now,
Initial output is 10 units and Final output is 25 units.
Page : 70 , Block Name : Exercises
Page 17 of 19
Page 19
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Q27 At the market price of Rs. 10, a firm supplies 4 units of output. The market price increases
to Rs. 30. The price elasticity of firm’s supply is 1.25. What quantity will firm supply at the new
price.
Answer.
Market Price Supply
10 4
30 ?
Given :
Now,
Therefore,
Firm will supply 14 units at new price.
Page 18 of 19
Q27 At the market price of Rs. 10, a firm supplies 4 units of output. The market price increases
to Rs. 30. The price elasticity of firm’s supply is 1.25. What quantity will firm supply at the new
price.
Answer.
Market Price Supply
10 4
30 ?
Given :
Now,
Therefore,
Firm will supply 14 units at new price.
Page 18 of 19
Page 20
Book : Introductory Microeconomics Ncert Solutions | Chapter - 4 Economics
Page : 70 , Block Name : Exercises
Page 19 of 19
Page : 70 , Block Name : Exercises
Page 19 of 19
Document Details
| Board / Org | NCERT |
| Exam | Class 12 |
| Type | Solution |
| Pages | 20 |
| Updated | 30 Apr 2026 |