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High Order Thinking Skills Questions - Producer Behavior and Supply | Economics Class 11 - Commerce PDF Download

HOTS

 

Giving reasons, state whether the following statements are true or false :

 

1. When there are diminishing returns to a factor, total product always decreases.

 

Ans :- False. When there  is diminishing returns to a factor, TPP increases at a decreasing rate.

 

2. TPP increases only when MPP increases.

Ans :- False. TPP also increases when MPP decreases but remains positive.

 

3. Increase in TPP always indicates that there are increasing returns to a factor.

Ans :- False. TPP increases even when there are diminishing returns to a factor.

 

4. When there are diminishing returns to a factor marginal and total products always fall.

Ans: - False. Only MPP falls, not TPP. In case of diminishing returns to a factor, TPP increase at diminishing rate.

 

5. Calculate MP for the following.

High Order Thinking Skills Questions - Producer Behavior and Supply | Economics Class 11 - Commerce

 

Ans :-  MP:             0          5        8         10           5         0          -4

 

HOTS

Q. Why AFC curve never touches ‘x’ axis though it lies very close to x axis?

Ans :- Because TFC can never be zero.

 

Q. Why AVC and AFC always lie below AC?

Ans:- AC is the summation of AVC & AFC so AC always lies above AVC & AFC.

 

Q. Why TVC curve start from origin?

Ans:- TVC is zero at zero level of output.

 

Q. When TVC is zero at zero level of output, what happens to TFC or Why TFC is not zero at zero level of output?

Ans:- Fixed cost are to be incurred even at zero level of output.

 

HOTS

 

Q. Can MR be negative or zero.

Ans:- Yes, MR can be zero or negative.

Q. If all units are sold at same price how will it affect AR and MR?

Ans:- AR and MR will be equal at levels of output.

Q. What is price line?

Ans:- Price line is the same as AR line and is horizontal to X-axis in perfect competition.

Q. Can TR be a horizontal Straight line?

Ans:- Yes, when MR is zero.

Q. What do you mean by revenue?

Q. Explain the concept of revenue ( TR, AR and MR)

Q. Define AR

Q. Prove that AR = price

Q. Prove that AR is nothing but demand curve.?

Q. Explain the relationships between AR and MR when price is constant and when price falls.

Q. Explain the relationships between TR and MR when price is constant.

Q. What is break- even point? Explain with a diagram.

Q. When the situation of ‘shut – down’ point arises for a firm?

Q. What happens to TR when a) MR is increasing, b) decreasing but remains positive and c) MR is negative?

Ans:-   a) TR increases at an increasing rate.

            b) TR increases at a diminishing rate.

            c) TR decreases.

 

Q. Why AR is more elastic in monopolistic competition than monopoly?

Ans:- Monopolistic competition market has close substitutes. Monopoly market does not have close substitutes.

 

Q. Why TR is 45 0 angle in perfect competition market?

Ans:-  In perfect competition market the goods are sold at the same price so AR= MR and the TR increases at a constant rate.

 

Q. Can there be Break- even point  with AR = AC

Ans:- Yes there can be breakeven point with AR=AC.

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FAQs on High Order Thinking Skills Questions - Producer Behavior and Supply - Economics Class 11 - Commerce

1. What factors influence producer behavior and supply?
Ans. Producer behavior and supply are influenced by various factors such as the cost of production, technology, government policies, market demand, and competition. These factors collectively determine the decisions made by producers regarding the quantity and price of goods or services they supply.
2. How does the cost of production impact producer behavior and supply?
Ans. The cost of production plays a crucial role in determining producer behavior and supply. Higher production costs, such as labor, raw materials, and machinery, can decrease the profitability of producing goods or services. As a result, producers may reduce supply or increase prices to maintain profitability. Conversely, lower production costs can incentivize producers to increase supply or lower prices.
3. What role does technology play in influencing producer behavior and supply?
Ans. Technology plays a significant role in shaping producer behavior and supply. Advancements in technology often lead to increased efficiency and productivity in production processes. This can lower the cost of production, enable producers to offer goods or services at competitive prices, and increase supply. Additionally, technology can also influence the types of goods or services produced, as producers may adapt to changing consumer preferences or market demands.
4. How do government policies impact producer behavior and supply?
Ans. Government policies can have a substantial impact on producer behavior and supply. Policies such as taxes, regulations, subsidies, and trade restrictions can influence the cost of production, market conditions, and profitability for producers. For example, higher taxes or stringent regulations can increase production costs, leading to decreased supply or higher prices. Conversely, subsidies or favorable trade policies can incentivize producers to increase supply or lower prices.
5. How does market demand affect producer behavior and supply?
Ans. Market demand is a crucial determinant of producer behavior and supply. Producers respond to changes in demand by adjusting their supply levels. When demand increases, producers may increase their supply to meet the market's needs. On the other hand, if demand decreases, producers may reduce supply to avoid excess inventory or price decreases. Understanding market demand is essential for producers to make informed decisions about their supply levels and pricing strategies.
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