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Sandeep Garg Solutions Class 11 – Chapter 8 – Part A – Microeconomics
Question 1
What is a Profit?
Ans: Profit refers to the excess of receipts from the sale of goods over the expenditure incurred on producing them.
Question 2
Define Producer’s Equilibrium.
Ans: Producer’s Equilibrium refers to that price and output combination, which brings maximum profit to the producer and profit declines as more is produced.
Question 3
On the basis of the data given below, determine the level of output at which the producer will be in equilibrium. Use the marginal cost-marginal revenue approach.
| Output (Units) | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Average Revenue (₹) | 7 | 7 | 7 | 7 | 7 | 7 | 7 |
| Total Cost (₹) | 8 | 15 | 22 | 28 | 33 | 40 | 48 |
Solution:
| Output (Q) (in units) | AR(₹) | TC(₹) | MC (₹) MCn=TCn−TCn−1 | MR (₹) MRn=TRn−TRn−1 |
| 1 | 7 | 8 | 8 | 7 |
| 2 | 7 | 15 | 7 | 7 |
| 3 | 7 | 22 | 7 | 7 |
| 4 | 7 | 28 | 6 | 7 |
| 5 | 7 | 33 | 5 | 7 |
| 6 | 7 | 40 | 7 | 7 |
| 7 | 7 | 48 | 8 | 7 |
Question 4
What are the two methods for determination of Producer’s Equilibrium?
Ans: The two methods for determination of producer’s equilibrium are,
- Total Revenue and Total Cost Approach (TR – TC Approach)
- Marginal Revenue and Marginal Cost Approach (MR – MC Approach)
Question 5
What are the conditions needed for the Producer’s Equilibrium?
Ans: The conditions needed for the producer’s equilibrium are,
- MC=MR
- MC is greater than MR after the MC = MR output level
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