The theory of the firm under perfect competition — Economics STD 11 Commerce — Question

Explain the concepts of (a) Marginal rate of substitution, (b) Budget line equation with the help of an example.

Explain the concept of ‘Marginal Rate of Substitution’ with the help of a numerical example. Also, explain its behaviour along an indifference curve.

How do the equilibrium price and quantity of a commodity change when price of input used in its production changes?

Market for a good is in equilibrium. There is simultaneous "decrease" both in demand and supply of the good. Explain its effect on market price.

How are the equilibrium price and quantity affected when:

1. both demand and supply curves shift in the same direction?
2. demand and supply curves shift in opposite directions?

On the basis of the information given below, determine the level of output at which the producer will be in equilibrium. Use the marginal cost-marginal revenue approach. Give reasons for your answer.

Output (Units)	Average Revenue(₹)	Total Cost(₹)
1	7	7
2	7	15
3	7	22
4	7	28
5	7	33
6	7	40
7	7	48

Complete the following table:

Output (Units)	Average Cost (₹)	Marginal Cost (₹)
1	12	-
2	10	-
3	-	10
4	10.5	-
5	11	-
6	-	17

Explain the implications of the following in perfectly competitive market:

1. Large number of sellers.
2. Homogenous products.

A table showing TC and TR of a firm is given. Calculate MC and MR and find out the equilibrium level of output.

Output	1	2	3	4	5	6	7	8	9	10
TC	45	80	95	105	135	175	225	285	360	440
TR	40	80	120	160	200	240	280	320	360	400

Explain the inverse relationship between price and quantity demanded of a commodity.OR
Why is the demand curve of the commodity negatively sloped?