{"id":118053,"date":"2022-04-20T11:18:43","date_gmt":"2022-04-20T05:48:43","guid":{"rendered":"https:\/\/www.mapsofindia.com\/my-india\/?p=118053"},"modified":"2022-04-20T11:18:43","modified_gmt":"2022-04-20T05:48:43","slug":"chapter-9-producer-equilibrium-questions-and-answers-ncert-solutions-for-class-12-micro-economics","status":"publish","type":"post","link":"https:\/\/www.mapsofindia.com\/my-india\/education\/chapter-9-producer-equilibrium-questions-and-answers-ncert-solutions-for-class-12-micro-economics","title":{"rendered":"Chapter 9 – Producer Equilibrium Questions and Answers: NCERT Solutions for Class 12 Micro Economics"},"content":{"rendered":"

Question 1. What conditions must hold if a profit- maximizing firm produces positive output in a competitive market?
\nOr
\nExplain the producer\u2019s equilibrium with MR\/MC approach (when Price remains constant with the rise in output).
\nOr
\nExplain the conditions of a producer\u2019s equilibrium in terms of marginal cost and marginal revenue. Use diagram
\nOr
\nWhy is the equality between marginal cost and marginal revenue necessary for a firm to be in equilibrium? Is it sufficient to ensure equilibrium? Explain.
\nOr
\nElaborate the implication of the conditions of equilibrium of a firm.<\/h3>\n

Answer: The conditions must hold if a profit maximizing firm produces positive output in a competitive market when price is constant\u2019under MR\/MC approach is determined where,
\n(i) MR = MC (ii) MC must be rising<\/h3>\n

\"\"<\/p>\n

According to Table, both the conditions of equilibrium are satisfied at 4 units of output. MC is equal to MR and MC is rising. MC is more than MR when output is produced after 4 units of output. So, Producer\u2019s Equilibrium will be achieved at 4 units of output. However, MR is equal to MC at 2 units of output also. But, second condition is not fulfilled here.
\nLet us understand the determination of equilibrium with the help of a diagram:<\/h3>\n

\"\"<\/p>\n

Producer\u2019s Equilibrium is determined at OQ level of output corresponding to point E as at this point, MC = MR and MC curve cuts MR curve from below. In Figure, output is shown on the horizontal axis and revenue and costs on the vertical axis. Producer\u2019s equilibrium will be determined at OQ level of output corresponding to point E because at this, the following two conditions are met:
\n(i) MC = MR;
\n(ii) MC curve cuts the MR curve from below.
\nWhen MR > MC, then producer will continue to produce as long as MR becomes equal to MC. It is so because firm will find it profitable to raise the output level.
\nWhen MR < MC, then producer will cut down the production as long as MR becomes equal to MC. It is so because firm will find it unprofitable to produce an extra unit. So, it starts reducing the level of output till MR = MC.<\/h3>\n

Question 2. Can there be a positive level of output that a profit-maximizing firm produces in a competitive market at which market price is not equal to marginal cost? Give an explanation. Or
\nExplain why will a producer not be in equilibrium if the conditions of equilibrium are not met.<\/h2>\n

Answer: The profit maximizing level of output is always determined where,
\n(i) MR = MC
\n(ii) MC must be rising. In other words, where price is equal to MC.
\nIf price is not equal to MC, profit maximizing condition cannot hold. It can be explained with the help of the following two cases:
\nCase 1: Price Greater Than MC
\n(i) In the given figure at output level q2, the market price is greater than marginal cost.
\n(ii) To show that q2 is not a profit maximizing level of output, we have taken q3 output level, which is right of qr
\n(iii) Suppose the firm increases its output level from q2 to qr The increase in total revenue of the firm from this output is the market price multiplied by the change in quantity (ATR = market price x AQ), that is, the area of rectangle q2q3CB.
\n(iv) On the other hand, the increase in total cost with this, increase in output is the area of the region q2q3XW.
\n(v) But, a comparison of the two area shows that the firm\u2019s profit is higher when output level is q3 rather than q1 So, q2 is not a profit maximizing level of output.
\nCase 2: Price Less Than MC
\n(i) In the given figure at output level q2, the market price is less than marginal cost.
\n(ii) To show that q2 is not a profit maximizing level of output, we have taken q3 output level, which is left of qr<\/h3>\n

\"\"<\/p>\n

(iii) Suppose now, that the firm reduce its output level from q2\u00a0to q1\u00a0The decrease in total revenue of the firm from this output is the market price multiplied by the change in quantity (ATR = market price x AQ), that is, the area of rectangle q2q3CB.<\/h3>\n

\"\"<\/p>\n

(iv) On the other hand, the decrease in total cost with this decrease in output is the area of the region q2q3WX.
\n(v) But, a comparison of the two area shows, that by reducing the output from q2\u00a0to q3, the decrease in cost is more than the loss in revenue. So, q2\u00a0is not a profit maximizing level of output.<\/h3>\n

Question 3. Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.<\/h2>\n

Answer: No, as sufficient condition of producer equilibrium is Marginal Cost must be rising when Marginal Cost = Marginal revenue. It can be explained with the help of following diagram:<\/h3>\n

\"\"<\/p>\n

Point F is not a producer equilibrium because at this point, marginal cost = marginal revenue when marginal cost is falling. It is so because after point F, and output then producer will continue to produce as long as MR becomes equal to MC as firm will find it profitable to raise the output level.<\/h3>\n

Question 4. The following table shows the total revenue and total cost schedules of a competitive firm. Calculate the profit at each output level. Determine also the market price of the goods.<\/h2>\n

Answer:<\/h3>\n

\"\"<\/p>\n

Market price (AR) = TR\/Quantity sold = Rs. 5. (TR = Total Revenue; TC = Total Cost)<\/h3>\n

\"\"<\/p>\n

Question 5. The following table shows the total cost schedule of a competitive firm. It is given that the price of the goods is Rs. 10. Calculate the profit at each output level. Find the profit maximising level of output.<\/h2>\n

\"\"<\/p>\n

Answer:<\/h3>\n

\"\"<\/p>\n

The producer achieves equilibrium at 6 units of output because at this point MC = MR and MC is rising
\nI. Very Short Answer Type Questions<\/h3>\n

Question 1. What is meant by profit?<\/h2>\n

Answer: Profit refers to the excess of revenue over cost.<\/h3>\n

Question 2. What are the two methods for determination of producer\u2019s equilibrium?<\/h2>\n

Answer: (i) TR \u2013 TC Approach
\n(ii) MR \u2013 MC Approach<\/h3>\n

Question 3. Explain the producer\u2019s equilibrium. Or
\nGive meaning of producer\u2019s equilibrium.<\/h2>\n

Answer: A producer is said to be in equilibrium when he produces that level of output at which his profits are maximum.
\nProducer\u2019s equilibrium is also known as profit maximisation situation.<\/h3>\n

Question 4. What is the general profit maximising condition for a producer (MR and MC approach)?<\/h2>\n

Answer: (i) MC = MR; and
\n(ii) MC curve cuts the MR curve from below (i.e., MC is rising).
\nII. Short Answer Type Questions<\/h3>\n

Question 1. What is the relation between Price and MC at equilibrium (when price falls with the rise in output)?<\/h2>\n

Answer:
\nWhen more output can be sold only by reducing the prices, AR or Price > MR.
\nEquilibrium is achieved when MC = MR.
\nSo, Price is more than MC at the equilibrium level.<\/h3>\n

Question 2. \u201cMC should be rising at the point of Producer\u2019s Equilibrium\u201d. Comment.<\/h2>\n

Answer:
\nThe given statement is correct.
\nIf MC is falling at the point of equilibrium, it means that it is possible to add to profits by producing more,
\nSo, MC should be rising at the point of producer\u2019s equilibrium.<\/h3>\n

Question 3. Find out the maximum profit position of a producer by comparing his MC and MR on the basis of the following data:<\/h2>\n

\"\"<\/p>\n

Answer: The producer will be in equilibrium when MR = MC. It occurs at 4 units of output where both MR and MC are equal to 7.
\nIll. True Or False<\/h3>\n

Question 1. A producer is in equilibrium when total cost and total revenue are equal.<\/h2>\n

Answer: False: A producer is in equilibrium when difference between total revenue and total cost is maximum so that maximum profit may be earned.<\/h3>\n

Question 2. If marginal revenue is equal to the total cost, producer is in equilibrium.<\/h2>\n

Answer: False: Producer is in equilibrium when marginal revenue is equal to marginal cost.<\/h3>\n

Question 3. A firm is in equilibrium if marginal cost curve cuts average revenue curve from below.<\/h2>\n

Answer: False: A firm is in equilibrium if marginal cost curve cuts marginal revenue curve from below.<\/h3>\n

Question 4. A firm gets maximum profits only if difference between average revenue and average cost is the maximum.<\/h2>\n

Answer: False: A producer is only in equilibrium if difference between total revenue and total cost is maximum.<\/h3>\n","protected":false},"excerpt":{"rendered":"

Class 12 Introduction to Economics NCERT book solutions for Chapter 9 – Producer Equilibrium Questions and Answers.<\/p>\n","protected":false},"author":21830,"featured_media":117801,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":{"0":"post-118053","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-education"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/118053","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/users\/21830"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/comments?post=118053"}],"version-history":[{"count":1,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/118053\/revisions"}],"predecessor-version":[{"id":118065,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/118053\/revisions\/118065"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/media\/117801"}],"wp:attachment":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/media?parent=118053"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/categories?post=118053"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/tags?post=118053"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}