NCERT Solutions for Class 12 Micro Economics Chapter-6

1. 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?

Ans: The demand curve is a graphic representation of the relationship among product rate and the quantity of the product demanded. It is drawn with fee at the vertical axis of the graph and quantity demanded on the horizontal axis. It's miles a graphic representation of a marketplace call for a time table. 

(a) If the full revenue curve is a positively sloped direct line passing via the beginning, then the slope of the demand curve or common revenue curve can be a horizontal line parallel to the x-axis. This takes place while expenses are regular at all stages of output.

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(b) If the entire sales curve is a horizontal line, then the demand curve or average revenue curve may be downward sloping. corporations can grow their quantity by using reducing the rate i.e., AR falls with increase in sales.

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

Ans: 

Demand Curve: To determine the demand curve, we must first determine the pricing for each unit of quantity. This can be accomplished by multiplying the total revenue values by the quantity. The following are the price ranges:

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3. What is the value of the MR when the demand curve is elastic?

Ans: When the demand curve is elastic, then according to the relationship the fraction will be less than 1. Hence, MR will be positive when it is positive. AR or demand curve will never be 0 as TR is always positive.

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The above formulation may be very beneficial when the demand characteristic has recognised consistent charge elasticity. commercial enterprise managers must estimate the cost of MR so that you can arrive at decisions approximately charge and output.

4. A monopoly firm has a total fixed cost of Rs 100 and has the following demand schedule:

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.

Ans:

As the full cost of the monopolist firm is zero, the income can be the maximum in which TR is the maximum. That is, on the sixth unit of output the firm might be maximizing its profit and the fast run equilibrium price might be Rs 50.

income of the firm = three hundred

quick run equilibrium charge =  Rs 50

profit = TR - TC

= 300 - 0

income = Rs 300

If the whole price is Rs one thousand , then the equilibrium may be at a point in which the distinction among TR and TC is the most.

TR is the maximum on the 6 th level of output. 

So earnings = 300 – 1000 =  - seven-hundred

So, the company is earning losses and now not earnings. as the monopolist company is incurring losses inside the short run, it'll stop its production in the long run.

5. 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?

Ans: If the government units a rule for the public region firm to simply accept the constant price, then, the monopoly company will need to behave like a wonderfully aggressive firm and might be a price taker. In this case, the price fixed Pe, as set by the government, will equate the call for and the deliver, as a way to decide the equilibrium factor 'E'.

At the rate Pe, the firm earns normal profit, i.e. zero economic profit.

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Equilibrium price =Pe (fixed by the government)

Equilibrium quantity = Qe 

Profit = Normal profit.

In a superbly aggressive marketplace, a company earns zero income. It implies that a competitive firm can get only regular profit.

6. Comment on the shape of MR curve in case when TR curve is a

(a) Positively sloped straight line

(b) Horizontal straight line

Ans:

(i) Based on the connection among MR and TR, it could be stated that after the TR curve is a definitely sloped straight line, then the MR curve is a horizontal immediate line parallel to the X axis. MR and call for curve are the identical, and the rate (AR) remains constant for distinctive output levels. This happens under best opposition. MR is regular therefore, TR will increase at a growing fee. This is why TR is definitely sloped in an instantaneous line.

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(ii) When the TR curve is a horizontal straight line, then MR is zero as it will touch the X axis. Therefore, the MR curve is also a horizontal straight line and coincides with the output-axis. It is because the units sold are the same at each level of output and Marginal sales is the additional sales generated from the sale of an additional unit of output.

MR = TRn - TRn-1

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

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

Ans: (a)

(b)MR equals MC at the 6th unit of output i.e., 4.

(c) At equilibrium, MR equals MC, and right here MR equals MC on the sixth unit of output, wherein MC is upward sloping. Hence, the equilibrium price is Rs 19.

(d) TR = Rs 114

TC =Rs 109

general earnings  = TR - TC

= Rs 114 – 109 = Rs five

Hence, income is the same as Rs 5 .

8. Will the monopolist firm continue to produce in the short run if a loss is incurred at the best short run level of output?

Ans: If the monopolist company incurs loss within the brief run, then it'll forestall manufacturing in the long run. A monopolist firm can earn losses within the quick run if the charge is much less than the minimum of AC. But if the price falls below the minimum of AVC, then the monopolist will prevent its operations. The firm will preserve to provide when the rate is in among the minimum of AVC and the minimal of AC.

9. Explain why the demand curve facing a firm under monopolistic competition is negatively sloped.

Ans: A monopolistic firm has differentiated products; thus, it has to decrease its fee in order to grow its income. the goods of various monopolistic firms are near substitutes to another. Each dealer has a few diplomas of monopoly power of "'Making' the price. in view that there are numerous near substitutes available, the result is downward / negative sloping and elastic call for curve. Which means as the fee decreases, the quantity demanded for those precise increases. Partial control over price enables a firm to pursue its own price policy. But while it fixes the price, it cannot fix demand for its product. More can be sold only at a lower price. Implying a negatively sloped demand curve.

10. What is the reason for the long run equilibrium of a firm in monopolistic competition to be associated with zero profit?

Ans: The long term time horizon is featured by means of the loose entry and exit of companies. If the corporations inside the quick run are incomes peculiar or notable ordinary income, then, new companies could be attracted to enter the market. due to the brand new entrants, the market delivery will increase. It results in the reduction inside the fee that in the long run falls sufficiently to emerge as the same to the minimum of average price. while the market price is identical to the minimum of AC, it implies that every one the companies earn ordinary income or 0 monetary earnings. Or we will say that this phenomenon of access to companies, enlargement of output and falling in fee will keep till earnings turns into 0.

On the contrary, if within the brief run the corporations are earning extraordinary losses, then the existing corporations will prevent manufacturing and exit the market. This could cause a decrease inside the market delivery, to be able to ultimately raise the charge. The rate will continue to upward thrust until it will become the same as the minimum of AC. 'charge = AC' implies that in the long run all the corporations will earn 0 monetary income.

Consequently, whilst the rate is identical to the minimum of AC, neither any present firm will exit nor any new firm will input the market and this would function in the long run equilibrium.

11. List the three different ways in which oligopoly firms may have.

Ans: Oligopoly in a community market happens when there are small numbers of companies producing a homogeneous commodity. Oligopoly companies can also behave inside the following 3 ways:

i) Cartel - so as to keep away from undue opposition, oligopolistic corporations might also engage in formal agreements or contracts. this could now not permit them to maximise their total profits together, but additionally seize a sizable market portion.

ii) Limitations to the entry and exit of new corporations - it may occur that present corporations attempt to adopt competitive fees which restricts the access of recent corporations into the oligopoly market. each producer believes in income maximization coverage as opposed to income maximization whilst figuring out charges.

iii) Commercial and differentiated products - it can take place that the firms recognize that charge competition will go away from them and therefore they emphasize greater on advertising their merchandise. it will permit them to capture the minds of clients and in a roundabout way boom their marketplace component. 

Examples:

working systems for smartphones and computers offer tremendous examples of oligopolies. Apple iOS and Google Android dominate telephone operating

structures, while pc running systems are overs had owed by means of Apple and home windows. (which is once more example of Duopoly?)The music entertainment industry is dominated through regular tune organization, Sony, BMG, Warner and EMI institution.

12. If duo poly behavior is one that is described by Cornet, the market demand curve is given by the equation q = 200 - 4p and both the firms have zero costs, find the quantity supplied by each firm in equilibrium and the equilibrium market price. 

Ans: 

Market demand curve 

Q = 200 - 4p

When the call for curve is an immediate line and general price is 0, the duopolistic unearths it most worthwhile to deliver half of the maximum demand of an excellent.

At P =Rs zero, marketplace call for is Q = two hundred – 4 (0) = 200 units

If firm B does not produce anything, then the market demand confronted by means of company A is 2 hundred devices. consequently, The supply of firm A = ½ * 200 = a hundred gadgets within the next spherical, the portion of market call for faced via company B is 200 -200/2 = two hundred – one hundred = one hundred devices.

Consequently, firm B might supply ½ (two hundred – two hundred/2) = 50 units

accordingly, company B has modified its supply from 0 to 50 gadgets. To this company A might react thus and the demand faced through firm A can be 2 hundred -1/2*(two hundred-200/2) = two hundred – 50 = one hundred fifty devices consequently, firm A might supply = 150/2 = seventy five gadgets

The amount furnished through firm A and firm B is represented within the table under.

Therefore, the equilibrium output supplied by firm A = 200/2 – 200/4 + 200/8 -200/16+200/32+ 200/64 + 200/128 + 200/256+… = 200/3 units

Similarly, the equilibrium output supplied by firm B = 200/3 units.

Market Supply = Supply by firm A+ Supply by firm B = 200/3 + 200/3

Equilibrium output or Market Supply = Q = 400/3 units…………… (1) 

For equilibrium price 

Q = 200 - 4p

= 200 – Q

P = 50 – Q/4

P = 50 – ¼ (400/3) (from (1))

P = 50 – 100/3

P = 50-100/3

P = Rs. 50/3

Therefore, the equilibrium output (total) is 400/3 units and equilibrium cost is Rs. 50/3.

13. What is meant by prices being rigid? How can oligopoly behavior lead to such an outcome? 

Ans: Price pressure means that the rate is unresponsive to the modifications in demand and value inside the industry. Oligopoly conduct leads to such rigid / constant / sticky expenses. Each company in an oligopoly market is faced with a Kinked call for Curve, the kink being at that factor at the call for curve which corresponds to the prevailing common rate typical via all the corporations at which they sell their output. This is due to the fact that even though any firm raises the charge of its product with the purpose of higher earnings, the other firm will no longer achieve this, and the primary company will lose its customers.

On the other hand, if one firm lowers its fee in an effort to earn higher income via maximizing its sales, then in response, the opposite firm may reduce the charge. Therefore, the growth in total market sales is shared via each of the firms. The firm that initiated promoting at a decreased charge can also get a lower share of the growth than expected.

Therefore, the companies do not alternate their costs because of the concern of rival's reaction. They are guided via long term goals and do not want to trade the prevailing charge. Consequently, there's no incentive for any company to exchange its price. This is why the expenses are regarded as inflexible fees or sticky charges.

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NCERT Solutions for Class 12 Microeconomics Chapters

Chapter 6 - Non Competitive Markets

Chapter 6 of Microeconomics Class 12 contains the concept of non-competitive markets. You have already learned that perfect competition is a market structure where both consumers and firms are price takers. In Ch 6 Microeconomics Class 12, you will discover situations where one or more of the conditions of perfect competition are not satisfied. The highlighted concepts of simple monopoly in the commodity market, types of revenues, price elasticity of demand, monopolistic competition,etc. have been well covered under this topic. These concepts have been explained in a simple and lucid language which will help students to understand the chapter better.

Class 12 Microeconomics Chapter-Wise Marks Weightage

This Class 12th Microeconomics Chapter 6 has a weightage of around 10 marks combined with Chapter 5. It is one of the most important topics regarding forms of market and price determination. The questions from this chapter keep repeating every year in the Board Examinations and hence students will find our content handy while preparing for their examinations.

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