CBSE Class 12 Economics HOTs Producer Behavoiur And Supply

Please refer to CBSE Class 12 Economics HOTs Producer Behavoiur And Supply. Download HOTS questions and answers for Class 12 Economics. Read CBSE Class 12 Economics HOTs for Part A Microeconomics Chapter 4 The Theory of the Firm under Perfect Competition below and download in pdf. High Order Thinking Skills questions come in exams for Economics in Class 12 and if prepared properly can help you to score more marks. You can refer to more chapter wise Class 12 Economics HOTS Questions with solutions and also get latest topic wise important study material as per NCERT book for Class 12 Economics and all other subjects for free on Studiestoday designed as per latest CBSE, NCERT and KVS syllabus and pattern for Class 12

Part A Microeconomics Chapter 4 The Theory of the Firm under Perfect Competition Class 12 Economics HOTS

Class 12 Economics students should refer to the following high order thinking skills questions with answers for Part A Microeconomics Chapter 4 The Theory of the Firm under Perfect Competition in Class 12. These HOTS questions with answers for Class 12 Economics will come in exams and help you to score good marks

HOTS Questions Part A Microeconomics Chapter 4 The Theory of the Firm under Perfect Competition Class 12 Economics with Answers

 

VERY SHORT ANSWER TYPE QUESTIONS: - (1 Mark Each)
 
Q.1. What happens to MPP when TPP increases at decreasing rate?
Ans. MPP falls but remains positive.
 
Q.2. As the variable input is increased by one unit, total output falls. What would you say about of marginal productivity labour?
Ans. Marginal productivity of labour is negative.
 
Q.3. Why is MC curve in short run U-shaped?
Ans. MC Curve in short run is U-shaped due to operation of the law of returns to a factor.
 
Q.4. Why does fixed cost not influence marginal cost?
Ans. Because marginal cost do not include fixed cost.
 
Q.5. When a seller sells his entire output at a fixed price, what will be the shape of AR & MR curves?
Ans. Both AR & MR are equal and coincide with each other on a horizontal line.
 
Q.6. Show that average revenue equals price.
Ans.AR=TR/Q = PXQ/Q =P=Price 
 
Q.7. What effect does a cost saving technical progress have on the supply curve?
Ans. Supply curve will shift to the right.
 
Q.8. What effect does an increase in excise tax have on the supply curve?
Ans. Supply curve will shift to the left.
 
Q.9. What happens to TPP when marginal productivity of variable input is negative?
Ans. TPP falls.
 
Q.10. When is TPP maximum in relation to MPP?
Ans. When MPP is zero.
 
Q.11. What happens to MPP when TPP is declining?
Ans. MPP declines and remains negative.
 
Q.12. How does fall in MPP affect TPP?
Ans. TPP increases at decreasing rate.
 
Q.13. What effect does an increase in input price have on the supply curve?
Ans. The supply curve will shift towards left-hand side.
 
Q.14. Why does average cost fall as output rises?
Ans. AC falls due to operation of the law of increasing returns to a factor as output rises.
 
Q15. Does fixed cost affect marginal cost? Give the answer with reason.
Ans. No, because fixed cost is not subject to change and it is not considered while calculating MC.
 
Q.16. What would be the effect of increase in the output on the TFC?
Ans. There would not be any effect of increase in the output on the TFC, It will be constant at different levels of production.
 
Q.17. If marginal revenue falls, will total revenue fall?
Ans. It may fall when MR falls and becomes negative. If MR falls but remains positive then TR may increase with diminishing rate.
 
Q.18. What is the price elasticity of supply of a commodity whose straight line supply curve passes through the origin forming an angle of 25º?
Ans. Price elasticity of supply will be equal to one when a straight line supply curve passes through the origin; angle does not matter anything.
 
Q. 19. Can MC be equal to TVC?
Ans.- Yes MC may be equal to TVC at output level one.
 
Q. 20 Why does the minimum point of AC curve fall towards right of AVC curve?
Ans.- Because AC is sum total of AVC and AFC.
 
Q.21. The two inversely S-shaped short run cost curves are parallel to each other and maintain a constant distance of Rs. 50. What is indicated by Rs. 50? Also identify the two inversely S-shaped short run cost curves.
Ans.- Rs. 50 is TFC. And two inversely S-shaped cost curves are TVC and TC respectively.
 
Q. 22. The equality of MC and MR is a condition necessary for equilibrium, but it is not by itself sufficient to ensure the attainment of producer‟s equilibrium. Comment.
Ans.- Yes. For consumers equilibrium it is also essential that after the equilibrium level of production MC should be greater than MR. Other-wise there will be an incentive to increase the output in order to maximize the profit.
 
Q. 23. Ram produces both Jeans and Shirts. How will an increase in the price of Jeans affect the supply curve of Shirts?
Ans.- An increase in the price of Jeans will decrease the supply of Shirts, because now it will be profitable to the producer to produce and sell more of Jeans instead of Shirts, as it has become expensive.
 
Q. 24. Will a firm stop production at break-even point in short run? Why?
Ans.- No, firm will not stop the production at break-even point because that firm has given best employment to its factors of production.
 
SHORT ANSWER TYPE QUESTIONS: (3/4 Marks Each)
 
Q.1. Why is more of a commodity supplied only at a higher price?
Ans.- Because increase in production leads to decrease in returns to a factor. That in turn leads to increase in cost. That is why more of a commodity supplied only at a higher price
 
Q. 2. Suppose the functions of demand and supply curves of a commodity are given by: qD = 100-p
qS = 60 + p for p≥ 15
= 0 for 0≤p<15
 
(i) What does p =15 indicate?
(ii) Find the equilibrium price and equilibrium quantity.
(iii) Whether the given commodity comes under the category of viable industry.
(iv) Calculate market demand and supply at price of Rs. 25 and Rs. 10. Show that at price of Rs. 25, there is excess supply and at price of Rs. 10, there is excess demand.
 
Ans.- (i) P=15 indicates that the minimum average cost of the firm is Rs. 15 and firm will not supply the commodity for any price less than Rs. 15
(ii) Equilibrium Price = Rs. 20 and equilibrium quantity = 80 units
(iii) Yes, the given commodity comes under the category of viable industry as there is some price, at which supply and demand happens to coincide.
(iv) At price Rs. 25 market demand = 75 units and market supply = 85 units. Therefore there will be excess supply of 10 units And at price of Rs. 10 market demand = 90 units and market supply = 70 units. Therefore there will be excess demand of 20 units.
 
Q. 3. There are three different supply curves passing through the origin. A curve makes an angel of 60o. Curve B makes an angel of 45o and curve C makes an angel of 30o. What will be the price elasticity of curve A, B and C?
Ans.- Price elasticity of supply of good will be equal to one if supply curve is passing through the origin point, irrespective of the angel made by it with the origin.
 
Q. 4. Why should MC curve cut MR curve from below to achieve producer‟s equilibrium?
Ans.- Because after equilibrium level of output, marginal cost should become greater than the marginal revenue. Other-wise there will be an incentive to increase the output in order to maximize the profit.
 
Q. 5. The gap between AC and AVC keeps on decreasing with rise in output, but they never meet each other. Comment.
Ans.- Yes it is right statement. Because the gap between AC and AVC is equal to AFC which goes on diminish as output increases. Since TFC is fixed at all levels of output, AFC goes on diminish as output increases.
 
Q. 6. If TVC=0, TC is also zero. Is it true or falls? Give reason for your answer.
Ans.- It is falls. Because in short TC = TFC + TVC. Therefore in short run TC will be some-thing positive even if TVC=0. But in long run TC = TVC. Therefore in long run TC will be zero if TVC=0.
 
Q. 7. Why increasing MP not sustainable?
Ans. Decrasing MP set in due to following reasons:-
1. Fixity of the factor: As more and more units of the variable factor continue to be combined with the fixed factor, the later gets over-utilized.
2. Imperfect Substitution among Factor: Beyond a certain limit, factors of production cannot be substitute for one another e.g. more and more of labour cannot be continuously used in place of additional capital.
 
Q. 8. Why MC cuts AC at its minimum?
Ans. because (i) When MC < AC, AC falls.
(ii) When MC = AC, AC is minimum.
(iii) When MC > AC, AC rises.
(iv) MC falls & rises faster than AC.
(v) Both are obtained from TC.
AC=TC/Q , MC= ΔTC/ΔQ
CBSE_Class_12_Economics_Producer_Behaviour_Set_B_1
Q. 9. How do changes in MR affect TR?
 
Ans. i) If MR increases, TR increases at increasing rate.
ii) If MR is constant, TR increases at constant rate.
ii) IF MR falls, TR increases at diminishing rate.
 
Q.10. What is MR? How is it related to AR?
Ans. MR refers to the change in TR due to sale of an additional unit.
Relation –
(i) If AR (Price) is constant, MR = AR
(ii) If AR (Price) falls, MR < AR.
(iii) If AR (Price) rises, MR > AR.
 
Q. 11. What will be the price elasticity of supply if the supply curve is a positively sloped straight line?
Ans. Es = 1 if the curve starts from the origin point.
Es> 1 if the curve starts from the y-axis and
E<1 if the curve starts from the x-axis.
 
Q. 12. State the relation between marginal revenue and average revenue when a firm:
(i) is able to sell more quantity of output at the same price.
(ii) is able to sell more quantity of output only by lowering the price.
 
Ans. Marginal revenue is the addition to total revenue from producing one more unit of output.
(i) MR = AR at all levels of the output. (In case of perfect completion market)
(ii) MR will be less than AR at all levels of the output. (In case of monopoly and monopolistic market)
 
LONG ANSWER TYPE QUESTIONS: (6 Marks Each)
 
Q. 1. In the following table, identify the different phases of the law of variable proportions and explain them with the help of the table and a diagram.
CBSE_Class_12_Economics_Producer_Behaviour_Set_B_2
Ans. Law of Variable Proportion states that if we go on using more and more units of a variable factor along with a fixed factor, the total output initially increases at an increasing rate, after that it increases at diminishing rate and finally it
declines.
It can be explained through the following three stages:
CBSE_Class_12_Economics_Producer_Behaviour_Set_B_3
CBSE_Class_12_Economics_Producer_Behaviour_Set_B_4
Stage 1:
• TPP increases at an increasing rate.
• MP increases and reaches at its maximum at the end of the stage.
• This is also called stage of increasing returns.
Stage 2:
• TPP increase but at diminishing rate.
• MPP starts decline but remains positive.
• This stage comes to an end when TPP is maximum and MPP is zero.
Stage 3:
• TP starts decline.
• MP becomes negative.
• This is also called stage of decreasing/negative returns.
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ELASTICITY OF SUPPLY:
 
Q.1. If price elasticity of supply of a commodity is 5. A producer supplies 500 units of this product at a price of Rs. 5 per unit. How much quantity of this product will be supplied, at the price of Rs. 6 per unit?
CBSE_Class_12_Economics_Producer_Behaviour_Set_B_8
Q.2. Due to a 10 per cent rise in the price of a commodity, its quantity supplied rises from 400 units to 450 units. Calculate its price elasticity of supply. Is the supply elastic?
CBSE_Class_12_Economics_Producer_Behaviour_Set_B_9
es = 1.25 (Yes, its supply is elastic.)
 
Q.3. The quantity supplied of a commodity at a price of Rs. 8 per unit is 400 units. Its price elasticity of supply is 2. Calculate the new price at which its quantity supplied will be 600 units?
CBSE_Class_12_Economics_Producer_Behaviour_Set_B_10
Q.4. When the price of a commodity rises from Rs.10 to Rs.12 per unit, its quantity supplied rises by 100 units. If es = 2, Calculate its quantity supplied at increased price.
CBSE_Class_12_Economics_Producer_Behaviour_Set_B_11
Quantity supplied at increased price = 250 + 100 = 350 units
 
Q.5. If es = 3, A seller supplies 20 units of the commodity at a price of Rs.8 per unit. How much quantity of the commodity will the seller supply when price rises by Rs.2 per unit?
CBSE_Class_12_Economics_Producer_Behaviour_Set_B_12

UNIT - III

PRODUCER BEHAVIOUR AND SUPPLY

QUESTIONS BASED ON HOTS WITH MODEL ANSWERS

VERY SHORT ANSWER TYPE QUESTIONS: - (1 Mark Each)

Q.1. What happens to TP when MP is zero?
 
Ans. TP is maximum.
 
Q.2. What happens to MPP when TPP increases at decreasing rate?
 
Ans. MPP falls but remains positive.
 
Q.3. As the variable input is increased by one unit, total output falls. What would you say about of marginal productivity labour?
 
Ans. Marginal productivity of labour is negative.
 
Q.4. Why MC curve is in short run U-shaped?
 
Ans. MC Curve in short run is U-shaped due to operation of the law of returns to a factor.
 
Q.5. Why does fixed cost not influence marginal cost?
 
Ans. Because marginal cost does not include fixed cost.
 
Q.6. When a seller sells his entire output at a fixed price, what will be the shape of AR & MR curves?
 
Ans. Both AR & MR are equal and coincide with each other on a horizontal line.
 
Q.7. Show that average revenue equals price. 
Ans. AR=TR/Q = PXQ/Q = P = Pr ice
 
Q.8. What effect does a cost saving technical progress have on the supply curve?
 
Ans. Supply curve will shift to the right.
 
Q.9. What effect does an increase in excise tax have on the supply curve?
 
Ans. Supply curve will shift to the left.
 
Q.10. What happens to TPP when marginal productivity of variable input is negative?
 
Ans. TPP falls.
 
Q.11. When is TPP maximum in relation to MPP?
 
Ans. When MPP is zero.
 
Q.12. What happens to MPP when TPP is declining?
 
Ans. MPP declines and remains negative.
 
Q.13. How does fall in MPP affect TPP?
 
Ans. TPP increases at decreasing rate.
 
Q.14. What effect does an increase in input price have on the supply curve?
 
Ans. The supply curve will shift towards left-hand side.
 
Q.15. Why does average cost fall as output rises?
 
Ans. AC falls due to operation of the law of increasing returns to a factor as output rises.
 
Q16. Does fixed cost affect marginal cost? Give the answer with reason.
 
Ans. No, because fixed cost is not subject to change and it is not considered while calculating MC.
 
Q.17. What would be the effect of increase in the output on the TFC?
 
Ans. There would not be any effect of increase in the output on the TFC, It will be constant at different levels of production.
 
Q.18. If marginal revenue falls, will total revenue fall?
 
Ans. It may fall when MR falls and becomes negative. If MR falls but remains positive then TR may increase with diminishing rate.
 
Q.19. What is the price elasticity of supply of a commodity whose straight line supply curve passes through the origin forming an angle of 75º?
 
Ans. Price elasticity of supply will be equal to one when a straight line supply curve passes through the origin; angle does not matter anything.
 
SHORT ANSWER TYPE QUESTIONS: (3/4 Marks Each)
 
Q.1. What do you understand by returns to factor? Why do diminishing returns to a factor operate?
 
Ans. Returns to a factor relates to the behavior of total output as one variable input say labour is varied. It is a short run concept. There are three aspects of returns to a factor.
 
(i) Increasing Returns to a factor,
 
(ii) Constant Returns to a Factor, and
 
(iii) Diminishing Returns to a Factor.
 
Diminishing returns to a factor may occur due to following reasons:-
 
1. Fixity of the factor: As more and more units of the variable factor continue to be combined with the fixed factor, the later gets over-utilized.
 
2. Imperfect Substitution among Factor: Beyond a certain limit, factors of production can not be substitute for one another e.g. more and more of labour cannot be continuously used in place of additional capital.
 
Q.2. What are the factors which give rise to increasing returns to variable factors?
 
Ans.1. Fuller utilization of the fixed factors- Generally fixed factors are indivisible and underutilized. With greater application of variable factor these factors are better utilized its MPP tends to rise.
 
2. Increased efficiency of variable factor- Application of specialization and division of labour among the units of variable factors leads to greater efficiency and increase in MPP.
 
Q.3. Explain the relationship between AC & MC with diagram.
 
Ans. (i) When MC < AC, AC falls.
(ii) When MC = AC, AC is minimum.
(iii) When MC > AC, AC rises.
(iv) MC falls & rises faster than AC.
(v) Both are obtained from TC.
CBSE_Class_12_Economics_Producer_Behaviour_1
Q.4. Why is AC curve in the short run U-shaped?
 
Ans. AC curve is U-shaped in short run due to operation of law of returns to factors (i.e., law of variable proportion). Initially production is subject to law of increasing returns (i.e. decreasing cost), then law of constant return (i.e. constant cost) and ultimately to law of diminishing return (i.e. increasing cost). As output is increased, AC first falls, reaches its minimum and then rises. Hence, AC curves become U-shaped.
 
Q.5. How do changes in MR affect TR?
 
Ans. i) If MR increases, TR increases at increasing rate.
ii) If MR is constant, TR increases at constant rate.
ii) IF MR falls, TR increases at diminishing rate.
 
Q.6. What is MR? How is it related to AR?
 
Ans. MR refers to the change in TR due to sale of an additional unit. Relation –
(i) If AR (Price) is constant, MR = AR
(ii) If AR (Price) falls, MR < AR.
(iii) If AR (Price) rises, MR > AR.
 
Q.7. What will be the price elasticity of supply if the supply curve is a positively sloped straight line?
Ans. Es = 1 if the curve starts from the origin point.
Es> 1 if the curve starts from the y-axis and
E<1 if the curve starts from the x-axis.
 
Q.8. Define marginal revenue. State the relation between marginal revenue and average revenue when a firm:
(i) is able to sell more quantity of output at the same price.Units Produced 
(ii) is able to sell more quantity of output only by lowering the price.
 
Ans. Marginal revenue is the addition to total revenue from producing one more unit of output.
(i) MR = AR at all levels of the output. (In case of perfect competitive market)
(ii) MR will be less than AR at all levels of the output. (In case of monopoly and monopolistic market)
 
Q.9. Explain how do the following determine price elasticity of supply:
(i) Nature of the good (ii) Time period.
 
Ans. (1) Nature of Commodity - Elasticity of industrial goods is more than that of agricultural goods. Similarly supply of durable goods e.g. table is more elastic than that of perishable goods e.g. vegetables.
 
(2) Time Period- Generally elasticity of supply is more in the long period than in shorter period of time. The reason is that in the long period, all adjustments to the changed price can be made easily and supply of commodity can be varied accordingly.
 
LONG ANSWER TYPE QUESTIONS: (6 Marks Each)
Q.1. In the following table, identify the different phases of the law of variable proportions and explain them with the help of the table and a diagram.
CBSE_Class_12_Economics_Producer_Behaviour_2
Ans. Law of Variable Proportion states that if we go on using more and more units of a variable factor along with a fixed factor, the total output initially increases at an increasing rate, after that it increases at diminishing rate and finally it declines. It can be explained through the following three stages:
CBSE_Class_12_Economics_Producer_Behaviour_3
CBSE_Class_12_Economics_Producer_Behaviour_4
Stage 1:
• TPP increases at an increasing rate.
• MP increases and reaches at its maximum at the end of the stage.
• This is also called stage of increasing returns.
Stage 2:
• TPP increase but at diminishing rate.
• MPP starts decline but remains positive.
• This stage comes to an end when TPP is maximum and MPP is zero.
Stage 3:
• TP starts decline.
• MP becomes negative.
• This is also called stage of decreasing/negative returns.
 
Q.2. All the inputs used in production of a good are increased simultaneously and in the same proportion. What are its possible effects on Total Product? Explain with the help of a numerical example.
Ans. The behaviour of total output in the long run time period is technically termed as Returns to Scale.
There are three possibilities:
(I) Increasing Returns to Scale (IRS):- It occurs when a given proportionate increase in all factor inputs (in some constant ratio) causes proportionately greater increase in output. For example: Suppose there are only two inputs, labour (L) and Capital (K). Suppose 1K +IL produce 100 units and 2K + 2Lproduce 250 units. Input rises by 100% while the output rises by 150%. (II) Constant Returns to Scale (CRS):- It occurs when a given proportionate increase in all factor inputs causes proportionately equal increase in output. At this stage, economies of scale are counter balanced by diseconomies of scale. For example, suppose 1K+1L produce 100 units and 2K+2L produce 200 units, both inputs and TP rise in the same proportion.
(III) Diminishing Returns to Scale (DRS):- It occurs when a given proportionate increase in all factor inputs causes proportionately lesser increase in output. For example, Suppose 1K+1L produce 100 units and 2K+2L produce 190 units, inputs rise by 100% while the output rise by 90%.
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3 - 4 MARKS QUESTIONS

 
Q. 1 Explain the likely behaviour of total product under the stage of increasing return to a factor with the help of numerical example.
 
Ans. Increasing return to a factor is the first phase of the Law of return to a factor. When more and more units of a variable factor is combined with fixed factor up to a certain level total physical product increases with increasing rate.
 
Machine               Units of labour              Total physical product
 
1                                1                                      10
 
1                                2                                      24
 
1                               3                                       42
 
Q.2  With the help of example distinguish between total fixed cost and total variable cost.
 
Ans. Total fixed cost                                                              Total variable cost
 
1.  Fixed cost remains constant at                            1.  variable cost changes with the  change  in  quantity.    
     each level of output ie do not                                   It increase it do not change with change.
     change with  change in quantity.
 
2.  It can not be zero when output is zero.                2.  it  is  zero  when  output  is  zero 
 
3.  Its curve is parallel to X-aixs                               3.  Its curve is parallel to the curve of total cost.
 
4.  Example :- Rent, wages of                                  4.  Example :- cost of raw material,
     permanant staff                                                      wages of casual labour.
 
Q. 3 Draw average cost, average variable cost and marginal cost curves on a single diagram and explain their relations. 
CBSE_Class_12_Economics_Producer_Behaviour_Set_A_1 
Relation of AC, AVC and MC
1. MC interects to AC and AVC at their minimum level
2. AC and AVC decreases before the interection by MC, but remain greater than MC.
3. AC and AVC starts to increase after the itersection by MC, and becomes less than MC.
4. As output increases, AC and AVC tends to be closer but the difference between AC and AVC can naver be zero.
 
Q. 4 Draw average cost, average variable cost and average fixed cost curves on a single diagram and explain their relation. 
 CBSE_Class_12_Economics_Producer_Behaviour_Set_A_2
1. AC is the vertical summation of AVC and AFC
2. The  differfernoce betwewen AC and.AVC falls  as output increases but the difference of AC and AFC increases.
3. As output increases AC and AVC tends to be closer but their curves do not interect each other because AFC always remains more than zero.
 
Q.5 Explain the relation between average revenue and marginal revenue when a firm can sell an additional unit or a good by lowering the price.
 
Ans. 1. AR and MR both decreases.
2. MR decrease at the rate of twice than AR.
3. MR become zero and negative but AR can never be zero.
 
Q. 6 Distingush between change in quantity supplied and change in supply.
 
Ans.                 Change in quantity                                                                                                                     supplied change in supply
 
1. It refers the change in supply due to change in price of the good                         1. It refer’s the change in supply due to the change in the determinents of supply other than price
2. Determinents of supply other than price remains unchanged                                                                 2. Price of the good remains unchanged.
3. Law of supply apply                                                                                                                           3. Law of supply does not apply.
4. There is upward and downward movement along                                                              4. supply curve shifted to leftward or rightward under this condition.
     with supply curve in this situation
 
Q. 7 Explain how does change in price of input affect the supply of a good.
 
Ans. Increase in price of input : increase in price of input is cause of a decrease in the supply of a good because the production cost of a good will increase due to increase in price of input. It will reduced the profit. So producer will decrease the supply of the good.
 
Decrease in price of Input : Decrease in price of input is a cause of increase in supply because when the price of input decrease the production cost of a good also also  decreases.  Decrease  in  cost  increases  the  profit  margin.  It
 
Q. 8  Explain how changes in prices of other products influence the supply of a given product.
 
Ans. The supply of a good is inversly influenced with the change in price of other product which can explain as fallows.
A. Rise in price of other product :– When there is rise in the price of other product the production of these product become more profitable due to unchanged cost in comparison of the production of given produce. As a result the producer will produce more quantity of other product so the supply of given good will decrease.
 
B. Fall in the price of other product :–
When there is fall in the price of other product the production of these product become less profitable due to unchanged cost in comparison of the production of given product. As a result producer will produce less quantity of other product so the factors of production shifted for the production of given good. It cause an increase in supply of given good.
 
Q. 9  Explain how technological advancement influence the supply of a given product.
 
Ans. Technological advancement brings a positive impact in the supply of a given product. It reduces per unit cost and increase the productivity of given factors of production. Due to these reasons production of given product becomes more profitable.
 
Q. 1 Explain the law of variable proporation with the help of diagram/schedule.
                                   OR
What is the likely behaviour of total product/marginal product when only one input is increased for increasing production? Use diagram/ schedule.
 
Ans. Law of variable proportion state the inpact of change in unit of a variable factor on the physical output. When more and more unit of a variable factor combined with fixed factor physical product passes though following phases.
 
Behaviour of TP
(i)      TP increases at an increasing rate
(ii)     TP increases at diminishing rate
(iii)    TP falls 
 
Behaviour of MP
(i) MP increases and becomes maximum.
(ii) MP decreases and becomes zero.
(iii) MP becomes negative.
 CBSE_Class_12_Economics_Producer_Behaviour_Set_A_3 
First Phase :– TPP increases with increasing rate upto A point. MPP also increase and becomes maximum of point C.
 
Second Phase :– TPP increases with diminishing rate and it is maximum on point B. MPP start to decline and becomes zero at D point.
 
Third Phase :– TPP starts to decline and MPP becomes negative. 
                     – Important instruction for giving the answer of above question. 
                     – Do not use diagram for the explaination of this question if it is instructed to use schedule and do not use schedule if the explaination of this question asked with the help of diagram. 
                     – Do not explain the behaviour of marginal product with the help of schedule and diagram. If there is instruction to explain only the behaviour of total product. 
                     – Do  not  explain  the  behaviour  of  total  product  with  help  of schedule and diagram if there is instruction to explain only the behaviour of marginal product.
 
Q. 2  What is producer’s equilibrium? Explain the conditions of produce’s equilibrium through the ‘marginal cast and marginal revenue’ approach. use diagram/schedule.
 
Ans. Producer’s equilibrium refer’s the stage under which with the help of given factor’s of production producer attain that level of production of which he is getting maximum profit. The conditions of producer’s equilibrium through the marginal cost and marginal revenue approach are as follows. 
1. Marginal cost should be equal to marginal revenue. 
2. With the increase in output after equilibrium marginal cost should be greater than marginal revenue.
 CBSE_Class_12_Economics_Producer_Behaviour_Set_A_4
Explanation of conditions :–
 
(i) So long as MC is less than MR, it is profitable for the producer to go on producing more because it adds to its profits. He stops producing more when MC becomes equal to MR.
 
(ii) When MC is greater than MR after equilibrium if means the profit will decline if producer will produce more units of the good.
 
Important instruction for giving the answer of the above question
 
– Use  only  one  schedule/diagram  given  as  above  for  the explaination. 
– Do not use diagram for the explaination of this question if it is instructed to use schedule and do not use schedule if the explaination of this question is asked with the help of diagram.
Part A Microeconomics Chapter 01 Introduction to Micro Economics
CBSE Class 12 Economics HOTs Introduction
Part A Microeconomics Chapter 03 Production and Costs
CBSE Class 12 Economics HOTs Production and Costs
Part A Microeconomics Chapter 05 Market Equilibrium
CBSE Class 12 Economics HOTs Market Equilibrium
Part A Microeconomics Chapter 06 Non Competitive Markets
CBSE Class 12 Economics HOTs Non Competitive Markets
Part B Macroeconomics Chapter 02 National Income Accounting
CBSE Class 12 Economics HOTs Economics Forms of Market and Price Determination
Part B Macroeconomics Chapter 06 Open Economy Macroeconomics
CBSE Class 12 Economics HOTs for Balance of Payment

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