CBSE Class 11 Economics Theory of Firm Under Perfect Competition Worksheet

THEORY OF FIRM UNDER PERFECT COMPETITION

I. Answer in one sentence only

1. Define Total Revenue.

2. What is supply curve of a firm in the short run?

3. What is the shut down point of a firm in the short run?

4. Define opportunity cost?

5. How is market supply curve of a commodity derived?

6. Define price elasticity of supply.

II. Explain in 30 words each

7. Discuss the nature of AR and MR curves of a firm under conditions of perfect competition.

8. Why do we consider firm as a price taker under perfect competition?

9. Distinguish between implicit cost and explicit cost.

10. Define a. Marginal Revenue b. Normal profits c. Supply

11. How is price elasticity of supply measured according to geometrical method?

II. Explain in 40 words each

12. Distinguish between change in quantity supplied and change in supply

13. A firm earns revenue of Rs.50 when market price of a good is Rs.10. The market price increases to Rs.15 and now the firm earns revenue of Rs. 150.What is the price elasticity of supply?

14. The market price of a good changes from Rs.5 to Rs20. As a result the quantity supplied by the form increases by 15 units. Price elasticity of firms supply curve is 0.5. Find initial and final level of output of the firm.

15. The following table shows the total cost schedule of a firm. It is given that the price of the good is Rs.10. Find profit maximising level of output of then firm with the help of TR & TC and MR & MC

Units:    0     1     2     3     4     5     6     7     8     9     10
TC(Rs)   5   15   22    27   31   38   49    63   81   101  123

16. What conditions must hold good if a profit maximising firm produces positive level of output.

17. State the law of supply with a schedule and diagram.

IV Explain in around 100 words.

18. What are the determinants of supply of a good? Explain using diagram.

19. Briefly explain the conditions of profit maximising level of output of a firm under perfect competition.

MCQ Questions for NCERT Class 12 Economics Supply and Price Elasticity of Supply

Question. Supply of a commodity is …… concept.
(a) stock
(b) flow
(c) Both
(a) and (b)
(d) wholesale 

Answer: B  

Question. The supply curve is usually
(a) upward rising
(b) downward sloping
(c) nothing definite can be said
(d) None of the above 

Answer: B

Question. When supply curve shifts to the right, there is ...... in supply.
(a) an increase
(b) expansion
(c) contraction
(d) decrease

Answer: A 

Question. The supply of a commodity implies
(a) actual product of a good
(b) stock available for sale
(c) total existing stock of the good
(d) the amount of goods offered for sale at a different prices, per unit of time 

Answer: B

Question. The functional relationship between supply of a commodity and its various determinants is known as
(a) Supply function
(b) Change in supply
(c) Change in quantity supplied
(d) None of the above

Answer: A  

Question. Contraction of supply curve means 
(a) upward movement along the supply curve
(b) downward movement along the supply curve
(c) rightward shift in supply curve
(d) leftward shift in supply curve

Answer: B

Question. Increase or decrease in supply means
(a) change in supply due to change in its own price.
(b) change in supply due to change in factors other than its own price.
(c) Both (a) and (b)
(d) None of the above 

Answer: B

Question. The claim that other things being equal, the quantity supplied of a good rises when the price of good rises and vice-versa is known as
(a) Law of Economics
(b) Law of Supply
(c) Law of Demand
(d) All of these 

Answer: B

Question. If a firm’s supply increases due to application of improved technology, this is known as
(a) Expansion in supply
(b) Contraction in supply
(c) Increase in supply
(d) Increase in quantity supplied 

Answer: C

Question. Elasticity of supply is defined as a measure of the responsiveness of quantity supplied of a good to change in
(a) price of concerned good
(b) price of substitute good
(c) demand
(d) None of these  

Answer: B

Question. Expansion in supply refers to a situation when the producers are willing to supply a
(a) larger quantity of the commodity at an increased price.
(b) larger quantity of the commodity due to increased taxation on that commodity.
(c) larger quantity of the commodity at the same price.
(d) larger quantity of the commodity at the decreased price. 

Answer: A

Question. When supply is perfectly inelastic, elasticity of supply is equal to
(a) – 1
(b) zero
(c) 1
(d) infinity

Answer: B

Question. Statement I Supply and quantity supplied are one and the same thing.
Statement II Change in supply due to price is called as change in quantity supplied.
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect 

Answer: B 

Question. Statement I Supply of precious goods is inelastic in nature.
Statement II Supply curve starting from Y-axis is elastic in nature.
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect

Answer: C

Question. A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is 
(a) zero
(b) infinite
(c) equal to one
(d) greater than zero but less than one 

Answer: B

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