CBSE Board Exam 2020: Check Important Questions & Answers for Class 12 Economics (Micro) - Chapter 4: Theory of Firm Under Perfect Competition

If you are appearing for CBSE Class 12th Board exams 2020, check this list of important questions and answers from Chapter 4 of Microeconomics.

Created On: Feb 6, 2020 12:12 IST
Modified On: Feb 6, 2020 13:28 IST
Important Questions & Answers for Class 12 Economics (Micro) - Chapter 4
Important Questions & Answers for Class 12 Economics (Micro) - Chapter 4

CBSE Class 12th Economic exam is scheduled for 13th March 2020. In this article we have complied a list of important questions from Chapter 4 of Part A (Microeconomics): Theory of Firm Under Perfect Competition. Questions given below are important questions and are expected to be asked in Class 12 Economics board exam 2019-20.

Ques 1 The Total Revenue earned by selling 20 units is Rs. 700. Marginal Revenue earned by selling 21st unit is Rs.70 . The value of Total Revenue

earned by selling total 21 units will be ____________. (Choose the correct alternative)

(a) Rs.721

(b) Rs.630

(c) Rs.770

(d) Rs.720

Solution: c) 770

Ques 2 If the market supply of a commodity X changes due to improvement in technology, the market supply curve will ________. (Fill up the blank)

Solution: shift rightwards

Ques 3 If the supply curve is a straight line parallel to the vertical axis (Y-axis), supply of the good is called as _________. (Fill up the blank)

(a) Unitary Elastic Supply

(b) Perfectly Elastic Supply

(c) Perfectly Inelastic Supply

(d) Perfectly Elastic Demand

Solution: c) Perfectly Inelastic Supply

CBSE Class 12 Syllabus 2020: All Subjects

Ques 4 If the percentage change in quantity supplied of commodity X is more than the percentage change in price of the commodity X, the coefficient of price elasticity of supply would be _______________ : (Choose the correct alternative)

(a) Es = 1

(b) Es < 1

(c) Es = 0

(d) Es > 1

Solution: d) Es > 1

Download CBSE Class 12 Economics Syllabus 2019-20 in PDF format

Ques 5 Which of the following statements are true or false ? Give valid reasons in support of your answer.

(a) Average cost curve cuts Average variable cost curve, at its minimum level.

(b) Average product curve and Marginal product curve are ‘U-shaped’ curves.

(c) Under all market conditions, Average revenue and Marginal revenue are equal to each other.

(d) Total cost curve and Total variable cost curve are parallel to each other.

Solution: a) The given statement is false. Average Cost curve is the vertical summation of Average Variable Cost and Average Fixed Cost(AC = AFC + AVC). Since, Average Fixed Cost cannot be zero (AFC ≠ 0) the two curves would never touch each other.

b) The given statement is false. As per Laws of Returns to a Factor, Average Product Curve and Marginal Product Curve both rise and then tend to fall. Thus, the two curves are inverted ‘U’ shaped curves and not ‘U’ shaped curves.

c) The given statement is false.This condition is obtained in perfect competition market a price remains constant only under the perfect competition a market.

d) The given statement is true. The difference of the two is represented by Total Fixed Cost (TFC). TFC remains constant at all levels of output. It represents the vertical distance between the two curves making them parallel to each other.

Ques 6 The coefficient of price elasticity of supply of a good is 3. It is known as ___________ . (Choose the correct alternative)

(a) Unitary Elastic Supply

(b) Perfectly Inelastic Supply

(c) Elastic Supply

(d) Inelastic Supply

Solution: c) Elastic supply.

Ques 7 Distinguish between ‘Supply’ and ‘Quantity Supplied’.

Solution: Supply refers to the different quantities of a commodity that the producer would be willing to sell at different prices. Quantity supplied refers to the quantity of the commodity that a seller would be willing to sell at a given price.

Ques 8 Complete the  following Revenue Schedule

Output sold (in units)

1

2

3

4

Total revenue (in <)

18

48

Average revenue (in <)

14

Marginal revenue (in <)

14

Solution:

 

Output sold

 

(in units)

 

Total Revenue

 

(in )

 

Average Revenue

 

(in )

 

Marginal Revenue

 

(in )

 

1

 

18

 

18

 

18

 

2

 

32

 

16

 

14

 

3

 

42

 

14

 

10

 

4

 

48

 

12

 

6

 Ques 9 State the relation between Average Product (AP) and Marginal Product (MP), using a schedule or diagram.

Solution:

  • When, MP is greater than AP; AP rises (from A to B).
  • When, MP is equal to AP; AP is constant and maximum (At point B).
  • When, MP is lesser than AP, AP falls (beyond B point).

Ques 10 Discuss with valid reason, what happens to Average Fixed Cost (AFC) curve as output produced increases.

Solution: As output increases, Average fixed Cost (AFC) curve decreases continuously but never touches to any axis. It is because, when total fixed cost is divided by incremental units of output, the resultant AFC curve falls and takes the shape of a rectangular hyperbola.

mportant Questions & Answers for Class 12 Economics (Micro) - Chapter 1

Important Questions & Answers for Class 12 Economics (Micro) - Chapter 2

Important Questions & Answers for Class 12 Economics (Micro) - Chapter 3

Important Questions & Answers for Class 12 (Macro) Economics - Chapter 1 , Chapter 2Chapter 3, Chapter 4, Chapter 5, Chapter 6