Q7 of 38 Page 1

Given the following schedule, state at which level of output, will the firm be at equilibrium and why.



The equilibrium is at the point at the 5th unit because both the conditions required for attaining equilibrium are satisfied:


a. MR = MC = 20


b. MC increases after the point of equilibrium


c.


More from this chapter

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5

Explain briefly the central problem of ‘‘What to produce’’.

 6

A rational consumer is consuming only two goods, Good X and Good Y with < 4 and < 5 as their respective prices. Her total money income is < 40. Answer the following questions, based on the given information :

(a) State the consumer’s budget line equation.


(b) What would be the slope of the budget line?


 8

What is meant by ‘Price Floor’ ? Explain using a suitable example.

OR


What is meant by ‘Price Ceiling’? Explain using a suitable example.


 9

If the price of a commodity rises by 10% and its quantity demanded falls from 40 units to 30 units, calculate the coefficient of price elasticity of demand. Comment on the nature of price elasticity of demand.

OR


Explain the effect of the increase in the level of air pollution, on the market demand for ‘‘Air Purifiers’’. (Use diagram)