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NCERT Textual Questions with Answers 12.17
 Q23. Suppose the demand and supply curve of commodity X in a perfectly competitive market 
are given by:
 qD = 700 – p
 q S = 500 + 3p for p ≥ 15
 = 0 for 0 ≤ p < 15
 Assume that the market consists of identical firms. Identify the reason behind the market 
supply of commodity X being zero at any price less than ̀ 15. What will be the equilibrium 
price for this commodity? At equilibrium, what quantity of X will be produced?
 Ans. This question is out of syllabus.
Q24. Considering the same demand curve as in exercise 22, now let us allow the free entry and 
exit of the firms producing commodity X. Also assume the market consists of identical 
firms producing commodity X. Let the supply curve of a single firm be explained as
 qS
f
 = 8 + 3p for p ≥ 20
 = 0 for 0 ≤ p < 20
(a) What is the significance of p = 20?
(b) At what price will be market for X be in equilibrium? State the reason for your answer.
(c) Calculate the equilibrium quantity and number of firms.
 Ans. This question is out of syllabus.
 Q25. Suppose the demand and supply curves of salt are given by:
 qD = 1.000 – p
 qS = 700 + 2p
(a) Find the equilibrium price and quantity.
(b) Now suppose that the price of an input to produce salt has increased so that the new 
supply curve is
 qS = 400 + 2p
 How does the equilibrium price and quantity change? Does the change confirm to your 
expectation?
(c) Suppose the government has imposed a tax of ` 3 per unit of sale of salt. How does it 
affect the equilibrium price and quantity?
 Ans. This question is out of syllabus.
 Q26. Suppose the market determined rent for apartments is too high for common people to 
afford. If the government comes forward to help those seeking apartments on rent by 
imposing control on rent, what impact will it have on the market for apartments?
 Ans. 
Saraswati Introductory Microeconomics12.18
 If the government comes forward and imposes price ceiling or maximum price that can be 
charged as rent on apartment, it will be at OR1. It is necessarily below the equilibrium price OR. 
It will cause (a) Excess demand of A1A2 units (b) Black marketing by landlords.
 Q27. What would be the shape of the demand curve so that the total revenue curve is 
(a) a positively sloped straight line passing through the origin?
(b) a horizontal line?
 Ans. (a) When TR curve is a positively sloping straight line passing through the origin then 
demand curve (or price line) will be horizontal. It is shown below:
 
 The reason is that demand curve is also the price line. When TR is a straight positively 
sloped line, then price at each level of output is constant.
 (b) When TR is a horizontal line, then demand curve is a rectangular hyperbola. It is shown 
below:
 The reason is that, the price at each level of output declines.
 Q28. From the schedule provided below calculate the total revenue, demand curve and the price 
elasticity of demand:
Quantity 1 2 3 4 5 6 7 8 9
Marginal Revenue (`) 10 6 2 2 2 0 0 0 –5
NCERT Textual Questions with Answers 12.19
 Ans.
Q MR TR Demand Curve or Price or AR eD
1
2
3
4
5
6
7
8
9
10
6
2
2
2
0
0
0
–5
10
16
18
20
22
22
22
22
17}
10
8
6
5
4.5
3.6
3.2
2.7
1.9
e > 1
e = 1
e < 1
 Rule: When with fall in price of good, total revenue rises then eD > 1, if it remains the same 
then eD = 1 and if it falls then eD < 1.
 Q29. What is the value of the MR when the demand curve is elastic?
 Ans. When demand curve is elastic (e > 1), MR is positive. 
The relationship is given by:
 MR = P(1 – 
1
e )
 Q30. Comment on the shape of the MR curve in case the TR curve is a
 (i) positively sloped straight line
 (ii) horizontal straight line.
 Ans. (i) When TR curve is positively sloped straight line, MR is a horizental line. MR coincides 
with the demand curve. Price or AR is constant at each level of output. When AR is constant 
then MR is also constant. 
TR
QO
TR
 
QO
MR MR AR�
}
}
Saraswati Introductory Microeconomics12.20
 (ii) When TR is a horizontal straight line, then MR is zero. It is because horizontal TR 
means when price falls, quantity demanded rises in the same proportion. Thus, MR is zero. 
MR curve coincides with the x-axis.
 
 Q31. The market demand curve for a commodity and the total cost for a monopoly firm 
producing the commodity is given by the schedules below. Use the information to 
calculate the following:
Units of Quantity 0 1 2 3 4 5 6 7 8
Price (`) 52 44 37 31 26 22 19 16 13
Units of Quantity 0 1 2 3 4 5 6 7 8
Total Cost (`) 10 60 90 100 102 105 109 115 125
(a) The MR and MC schedules
(b) The quantities for which the MR and MC are equal
(c) The equilibrium quantity of output and the equilibrium price of the commodity
(d) The total revenue, total cost and total profit in equilibrium.
 Ans. Revenue Schedules
Q (Units) P (`) TR = P × Q 
(`) MR = 
D
D
TR
Q
 (`)
0
1
2
3
4
5
6 
7
8
52
44
37
31
26
22
19
16
13
0
44
74
93
104
110
114
112
104
–
44
30
19
11
6
4
–2
–8
NCERT Textual Questions with Answers 12.21
Cost Schedules
Q (Units) TC (`) MC (`)
0
1
2
3
4
5
6
7
8
10
60
90
100
102
105
109
115
125
–
50
40
10
2
3
4
6
10
 (b) For quantity of 6 units, MR is equal to MC.
 (c) Equilibrium quantity of output occurs where 
 MR = MC
 \ Equilibrium quantity = 6 units
 \ Equilibrium price = 19
 (d) TR = 114
 TC = 109
 Total profit = TR – TC
 = 114 – 109 = 5
 Q32. Will the monopolist firm continue to produce in the short-run if a loss is incurred at the 
best short-run level of output?
 Ans. If the monopolist firm incurs loss in the short-run, then it will stop production in the long-
run.
 Q33. Explain why the demand curve facing a firm under monopolistic competition is negatively 
sloped.
 Ans. The demand curve of a firm under monopolistic competition is negatively sloped because 
of product differentiation. The product of the sellers are differentiated but close substitutes 
of one another. Each seller has some degree of monopoly power of ‘Making’ the price. But 
since there are many close substitutes available, the result is downward sloping and elastic 
demand curve.
 Q34. What is the reason for the long-run equilibrium of a firm in monopolistic competition 
to be associated with zero profit?
 Ans. The reason why firm in monopolistic competition earns zero profit in the long-run is free 
entry and exit of firm. If firm earns super-normal profits in the short-run then new entry 
will take place in the long-run. If firm is incurring losses in the short-run, then firm will 
leave in the long-run. The result is zero abnormal profits in the long-run.
Saraswati Introductory Microeconomics12.22
 Q35. List the three different ways in which oligopoly firms may behave.
 Ans. Oligopoly firm may:
 (a) Cooperate with each other and formally have a contract or written document of their 
policies.
 (b) Cooperate with each other but have tacit (informal) understanding.
 (c) Not cooperate with each other.
 Q36. What is meant by prices being rigid? How can oligopoly behaviour lead to such an 
outcome?
 Ans. Rigid prices means that even if cost or demand changes there will be no change in the price 
of the commodity. Oligopoly behaviour leads to such rigid/ constant/ sticky prices because:
 (a) firm have fair and satisfactory profit margin in the price. Small changes in cost and demand 
get adjusted in the profit margin.
 (b) The unit of changing prices in terms of printing new price lists, advertising cost, cost of 
informing the consumers, etc. is more. It discourages the firms to make changes in the 
price. 
 (c) Firms fear rival firm’s reactions. Firms are guided by long-term objectives and do not 
want to change the prevailing price.
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