﻿ From the following information about a firm, find the firms equi

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## CBSE Class 12 Economics Solved Question Paper 2014

11.

Why are the firms said to be interdependent in an oligopoly market? Explain.

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12.

A consumer consumes only two goods. Explain consumer's equilibrium with the help of utility analysis.

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13.

What happens to the demand of a good when consumer's income changes? Explain.

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14.

State the behaviour of marginal product in the law of variable proportions. Explain the causes of this behaviour.

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15.

Explain the conditions of consumer's equilibrium with the help of the indifference curve analysis.

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16.

Explain the three properties of the indifference curves.

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# 17.From the following information about a firm, find the firms equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also find profit at this output. Output (units) Total Revenue (Rs.) Total Cost (Rs.) 1 7 8 2 14 15 3 21 21 4 28 28 5 35 36

 Output(units) Total Revenue(Rs.) Total Cost(Rs.) Marginal Revenue(Rs.) Marginal Cost(Rs.) Profits(TR - TC) 1 7 8 - - -1 2 14 15 7 7 -1 3 21 21 7 6 0 4 28 28 7 7 0 5 35 36 7 8 -1

According to the MR-MC approach, the firm (or producer) attains its equilibrium, where the following two necessary and sufficient conditions are fulfilled.
1. MR = MC
2. MC must be rising after the equilibrium level of output
Thus from the table, we can say that the firm is in equilibrium at output equal to 4 units. When output is 4 units, MR= MC (thus, the first condition is satisfied) and MC increases after the 4th unit of output (therefore, the second condition is satisfied).
At output less than 4 units, if the firm produces slightly lesser level of output than 4 units, then the firm is facing price that exceeds the MC. This implies that higher profits can be achieved by increasing the level of output to 4 units. On the other hand, if the firm produces slightly higher level of output than 4 units, then the firm's MC exceeds its MR, thereby making profits negative. This implies that higher profits can be achieved by reducing the output level to 4 units. Thus, point E is the producer's equilibrium and 4 units of output is the profit maximising output level, where Price = MC and also MC is rising.

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18.

Market of a commodity is in equilibrium. Demand for the commodity 'increases'. Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram.

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19.

What are demand deposits?

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20.

What is involuntary unemployment?

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