Chapter 4: The Theory of Firm under Perfect Competition

Q21Written answer

The following table shows the total cost schedule of a competitive firm. It is given that the price of the good is Rs. 10. Calculate the profit at each output level. Find the profit maximising the level of output.

Quantity Sold	TC (Rs)
0	5
1	15
2	22
3	27
4	31
5	38
6	49
7	63
8	81
9	101
10	123

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NCERT Microeconomics Solutions for Class 12 Chapter 4-4

Profit maximisation occurs when the difference between revenue and cost is maximum; in the above table, it occurs in 5 units of output and the profit earned is Rs. 12

Q22Written answer

Consider a market with two firms. The following table shows the supply schedules of two firms: SS₁ denotes the supply schedule of firm 1, and SS₂ denotes the supply schedule of firm 2. Calculate the market supply schedule.

Price (Rs )	SS₁ (units)	SS₂ (units)
0	0	0
1	0	0
2	0	0
3	1	1
4	2	2
5	3	3
6	4	4

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NCERT Microeconomics Solutions for Class 12 Chapter 4-5

Q23Written answer

Consider a market with two firms. In the following table, columns labelled SS₁ and SS₂ give the supply schedules of firm 1 and firm 2, respectively. Compute the market supply schedule.

Price (Rs )	SS₁ (kg)	SS₂ (kg)
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

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NCERT Microeconomics Solutions for Class 12 Chapter 4-6

Q24Written answer

There are three identical firms in a market. The following table shows the supply schedule of firm 1. Calculate the market supply schedule.

Price (Rs )	SS₁ (units)
0	0
1	0
2	2
3	4
4	6
5	8
6	10
7	12
8	14

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As per the question, when the three firms are identical, all of them will have the same supply curve. Market supply will be the sum of all three firms’ supply output

NCERT Microeconomics Solutions for Class 12 Chapter 4-7

Q25Written answer

A firm earns a revenue of Rs. 50 when the market price of a good is Rs. 10. The market price increase to Rs. 15, and the firm now earns a revenue of Rs. 150. What is the price elasticity of the firm’s supply curve?

NCERT Microeconomics Solutions for Class 12 Chapter 4-8

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Q26Written answer

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.

NCERT Microeconomics Solutions for Class 12 Chapter 4-11

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Q27Written answer

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 the firm’s supply is Rs. 1.25. What quantity will the firm supply at the new price?

NCERT Microeconomics Solutions for Class 12 Chapter 4-13

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Perfect Competition – Perfect competition explains a market structure where competition is at its inordinate possible degree. To make it more concise, a market which displays the following characteristic features in its composition is said to show accurate competition.
Characteristic features of perfect competition are as follows:

A large number of buyers and sellers
Homogenous or equivalent product
Liberty of entry and exit
Apt mobility
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