Commerce Exam  >  Commerce Notes  >  Economics Class 11  >  Short Answer Questions (with Solutions) - Forms of Market and Price Determination

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce PDF Download

Very short answer questions

1. Define perfect competition.

Ans:- Perfect competition is a market with large number of buyers and sellers , selling homogeneous product at same price.

2. Define monopoly.

Ans: Monopoly is a market situation dominated by a single seller who has full control over the price.

 3. Define monopolistic competition.

Ans:- It refers to a market situation in which many buyers and sellers selling differentiated product and  have partial control over the price.

 4. Under which market form firm is a price maker?

Ans:- Monopoly

 5. What are selling cost?

Ans:- Cost incurred by a firm for the promotion of sale is known as selling cost. (Advertisement cost)

 6. What is oligopoly?

Ans:- Oligopoly is defined as a market structure in which there are few large sellers who sell either homogenous or differentiated goods.

 7. In which market form is there product differentiation?

Ans:- Monopolistic competition  market and oligopoly market

 8. What is product differentiation?

Ans: It means close substitutes offered by different producers to show their output differs from other output available in the market. Differentiation can be in colour, size packing, brand name etc to attract buyers.

 9. What do you mean by patent rights?

Ans:- Patent rights is an exclusive right or license granted to a company to produce a particular output under a specific technology.

 10. What is price discrimination?

Ans: - It refers to charging of different prices from different consumers for different units of the same product.

 11. What is the shape of marginal revenue curve under monopoly?

Ans:- Under monopoly market MR curve is downwards sloping curve form left to right and it lies below the AR curve.

 12. What do you mean by abnormal profits?

Ans:- It is a situation for the firm when TR > TC.

 13. Why AR is equal to MR under perfect competition?

Ans:- AR is equal to MR under perfect competition because price is constant.

 14. What are advertisement costs?

Ans:- Advertisement cost are the expenditure incurred by a firm for the promotion of its sales such as publicity through TV , Radio , Newspaper , Magazine etc.

15.  What is short period?

Ans:- Short period refers to that much time period when quantity of output can be changed only by changing the quantity of variable input and fixed factors remaining same.

 16. Define long period.

Ans:- Long period refers to that much time period available to a firm in which it can increase its outputs by changing its fixed and variable inputs.

 17. What is meant by normal profit?

Ans:- Normal profit is the minimum amount of profit which is required to keep an entrepreneur in production in the long run.

 18. What is break-even price?

ANs:- In a perfectly competitive market, break- even price is the price at which a firm earn normal profit (Price=AC). In the long run, Break- even price is that price where P=AR=MC

 

Short Answer Questions: (3 / 4 Marks)

Q1. Explain any four characteristics of perfect competition market.

Ans:

i) Large number of buyers and sellers : The number of buyers and sellers are so large in this market that no firm can influence the price.

ii) Homogeneous products: Products are uniform in nature. The products are perfect substitute of each other. No seller can charge a higher price for the product. Otherwise he will lose his customers.

iii) Perfect knowledge: Buyers as well as sellers have complete knowledge about the product.

iv) Free entry and exit of firm: Under perfect competition any firm can enter or exit in the market at any time. This ensures that the firms are neither earning abnormal profits nor incurring abnormal losses.

Q2. Explain briefly why a firm under perfect competition is a price taker not a price maker?

Ans:- A firm under perfect competition is a price taker not a price maker because the price is determined by the market forces of demand of supply. This price is known as equilibrium price. All the firms in the industry have to sell their outputs at this equilibrium price. The reason is that, number of firms under perfect competition is so large. So no firm can influence the price by its supply. All firms produce homogeneous product.

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

 

Q3. Distinguish between monopoly and perfect competition.

Ans. 

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

 

Q4. Which features of monopolistic competition are monopolistic in nature?ii) Control over price

Ans:-   

  • Product differentiation
  • Control over price
  • Downward sloping demand curve

Q5. What are the reasons which give emergence to the monopoly market?

Ans:- 

  • Patent Rights: Patent rights are the authority given by the government to a particular firm to produce a particular product for a specific time period.
  • Formation of Cartel: Cartel refers to a collective decision taken by a group of firms to avoid outside competition and securing monopoly right.
  • Government licensing: Government provides the license to a particular firm to produce a particular commodity exclusively.

 

Q6. Explain the process of price determination under perfect competition with the help of schedule and a diagram.

Ans. Equilibrium price is that price which is determined by market forces of demand and supply. At this price both demand and supply are equal to each other. Diagrammatically it is determined at the point where demand curve and supply curve intersect each other. At this point price is known as equilibrium price and quantity is known as equilibrium quantity.

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

 

Q7. When will equilibrium price not change even if demand and supply increase?

Ans:- When proportionate  increase in demand is just equal to proportionate  increase in supply. Equilibrium price will not change. It can be shown in the following diagrams.

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

 

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

In the above diagram increase in demand is just equal to increase in supply. Demand curve shift from D to Dand supply curve shift from S to S1 which intersect at point E. Thus equilibrium price remain unchanged at OP though equilibrium quantity increased from OQ to OQ1.

 

Q8. How does increase in price of substitute goods in consumption affect the equilibrium price of a good? Explain with a diagram.

Ans:- An increase in price of substitute goods (coke) will cause increase in demand for its related goods (Pepsi) . The demand curve for Pepsi will shift to the right side. The supply curve of Pepsi remains the same. It will lead to an increase in equilibrium price of Pepsi and increase in quantity also.

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

Result: Price increases from OP to OP1.Quantity demand increases from OQ to OQ1

 

Q9. How does the equilibrium price of a normal commodity change when income of its buyers falls? Explain the chain effects.

Ans. 

  • When income falls demand falls
  • Supply remaining unchanged .There is excess supply at a given price
  • This leads to competition among sellers to reduce the price.
  • As a result demand starts rising and supply starts falling.
  • These changes continue till a new equilibrium price is established where demand equal supply.
  • Equilibrium price falls.

 Q10. Show with the help of diagram the effect on equilibrium price and quantity when supply is perfectly inelastic and demand increases and decreases?

Ans:-

  Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

When supply is perfectly inelastic and demand increases. Demand curve shift to towards right. The new demand curve Dintersects the supply curve at point E1.

Result : Price increases from OP to OP1 and quantity demand remains unchanged.

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

In the above diagram demand curve shift left wards from D to D1 Price falls from OP to OP1 , but quantity remains same.

 

The document Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce is a part of the Commerce Course Economics Class 11.
All you need of Commerce at this link: Commerce
75 videos|274 docs|46 tests

Top Courses for Commerce

FAQs on Short Answer Questions (with Solutions) - Forms of Market and Price Determination - Economics Class 11 - Commerce

1. What are the different forms of markets mentioned in the article?
Ans. The different forms of markets mentioned in the article are perfect competition, monopoly, monopolistic competition, and oligopoly.
2. How is price determined in a perfect competition market?
Ans. In a perfect competition market, price is determined by the intersection of the demand and supply curves, where the quantity demanded equals the quantity supplied at a specific price level.
3. What is the key characteristic of a monopoly market?
Ans. The key characteristic of a monopoly market is that there is only one seller who controls the entire market and has the power to set prices.
4. How does price determination differ in monopolistic competition compared to perfect competition?
Ans. In monopolistic competition, firms have some control over prices due to product differentiation and brand loyalty, whereas in perfect competition, prices are determined solely by market forces.
5. What is the significance of understanding the different forms of markets and price determination for businesses?
Ans. Understanding the different forms of markets and price determination is crucial for businesses as it helps them strategize their pricing, production, and marketing efforts to remain competitive and profitable in the market.
75 videos|274 docs|46 tests
Download as PDF
Explore Courses for Commerce exam

Top Courses for Commerce

Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Related Searches

practice quizzes

,

mock tests for examination

,

pdf

,

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

,

Summary

,

MCQs

,

Free

,

Semester Notes

,

shortcuts and tricks

,

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

,

ppt

,

video lectures

,

Previous Year Questions with Solutions

,

Short Answer Questions (with Solutions) - Forms of Market and Price Determination | Economics Class 11 - Commerce

,

Sample Paper

,

Objective type Questions

,

Important questions

,

Extra Questions

,

Exam

,

Viva Questions

,

study material

,

past year papers

;