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The theory of the firm under perfect competition — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsThe theory of the firm under perfect competition1 Mark
Question
‘A loss-making firm has inelastic supply'. Do you agree? If yes, why?
✓

Answer

Yes, I agree that a loss-making firm has inelastic supply. This is mainly because the firm cannot adjust its production as quickly as the price increase. Such firm will not have enough money to invest in additional production. This will result in less percentage of increase in supply than the percentage of increase in price.

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