Class test Eco XI Supply and Perfect competition market

1.  A producer offers to sell 400 units of a commodity when its price is 10 per unit, while only 200 units are offered if the price reduces to 5 per unit. Find elasticity of supply.

2.  The market price of good changes from $5 to $20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.

3.  State any three causes of a leftward shift of supply curve.

4.  Draw straight line supply curves with Price Elasticity of Supply

 (i) Equal to one  (ii)Less than one   (iii) More than one 

5.   In which market form does a firm face a perfectly elastic demand curve?

6.   What is meant by the term ‘price – taker ‘ in the context of a firm?

Question 7. What induces new firms to enter an industry?

Question 8. If the firms are earning abnormal profits how will the ‘number of firms in industry change?

Question 9. In which market form are goods sold at a uniform price?

Question 10. Why are selling costs not incurred in perfect competition?

In which market form does a firm face a perfectly elastic demand curve?

Answer: Perfectly competitive market.

Question 7. What induces new firms to enter an industry?

Answer: Abnormal profits, i.e., above normal profits.

Question 8. If the firms are earning abnormal profits how will the ‘number of firms in industry change?

Answer: The number of firms in the industry will increase.

Question 9. In which market form are goods sold at a uniform price?

Answer: Perfect competition.

Question 10. Why are selling costs not incurred in perfect competition?

Answer: Selling costs are not incurred in perfect competition as there exists perfect knowledge among the buyers and sellers.

Question 11. What is meant by the term ‘price – taker ‘ in the context of a firm?

Answer: A firm is said to be a price-taker if it has to accept the price, as determined by the market forces of demand and supply.