MICROECONOMICS CH : 7 PRODUCTION FUNTION AND RETURNS TO A FACTOR — Economics STD 11 Commerce — Question

Each firm in a perfectly competitive market is a price taker; the equilibrium price and industry output are determined by demand and supply. Price-taking behaviour is central to the model of perfect competition. Perfectly competitive firms in general-have no reason to charge a price lower than the market price. Because buyers have complete information and because we assume each firm's product is identical to that of its rivals, firms are unable to charge a price higher than the market price. For perfectly competitive firms, the price is very much like the weather: they may complain about it, but in perfect competition there is nothing any of them can do about it. While a firm in a perfectly competitive market has no influence over its price, it does determine the output it will produce. In selecting the quantity of that output, one important consideration is the revenue the firm will gain by producing it.

1. Why can a firm not earn abnormal profits under perfect competition in the long run?
2. Under perfect competition the seller is price taker. How?

Discuss merits and demerits of deliberate sampling.

The ranking of ten students in two subjects A and B are as below:

A	3	5	8	4	7	10	2	1	6	9
B	6	4	9	8	1	2	3	10	5	7

What is the coefficient of rank correlation?

Explain the law of supply with the help of a supply curve.

Explain the effect of increase in income of the consumer on the demand for a good.

What will be the effect of the following changes in total revenue on marginal revenue?
(i) Total revenue increases at a decreasing rate.
(ii) Total revenue increases at a constant rate.

What are the characteristics of a perfectly competitive market?

Given below is the percentage of marks secured by 5 students in Economics and Statistics:

Student	A	B	C	D	E
Marks in Economics	60	48	49	50	55
Marks in Statistics	85	60	55	65	75

Calculate the coefficient of rank correlation.