CBSE Class 12 Economics HOTs Economics Forms of Market and Price Determination
CBSE Class XII Economics -Economics Forms of Market and Price Determination HOTs Questions Database. Based on CBSE and CCE guidelines. The students should practice these HOTs Questions to gain perfection which will help him to get more marks in CBSE examination. Based on CBSE and CCE guidelines. Based on the same pattern as released by CBSE every year. CBSE releases HOTs Questions every year. These papers are released prior to the CBSE board examinations so that students can do practice. database of 1 marks, 2 marks, 3 marks and 5 marks questions. Please refer to more CBSE sample papers, question papers, HOTs etc in other links.
FORMS OF MARKET AND PRICE DETERMINATION
QUESTIONS BASED ON HOTS WITH MODEL ANSWERS
Q 1. Who determines price under perfect competition?
Ans: Price under perfect competition is determined by the forces of market demand and market supply in industry.
Q 2. If the firms are earning abnormal profits, how will the number of firms in the industry change?
Ans: The number of firms in the industry will tend to increase.
Q 3. How much loss can a firm bear?
Ans: A firm can bear losses upto its total fixed costs.
Q 4. Explain the motivation behind granting patent rights.
Ans: Motivation behind granting patent rights are:
(A) To encourage research and development; and
(B) To encourage new discoveries and innovations.
Q 5. Explain how the efficiency may increase if two firms merge?
Ans: When the two firms merge, their combined efficiency is expected to improve owing to:
(A) Increase in the scale of output and the consequent economies of scale.
(B) Better division of labour and specialization; and
(C) Use of better technology, saving the cost of production.
Q 6. Why is the demand curve facing a monopolistically competitive firm likely to be very elastic?
Ans: It is because the products produced by the monopolistically competitive firms are close substitutes to each other. If products are close substitutes to each other the elasticity of demand is high, which is what makes the firm’s demand curve(under monopolistic competition) very elastic.
Q 7. Why is the demand curve facing a firm perfectly elastic under perfect competition but less than perfectly elastic under monopolistic competition?
Ans. The demand curve under perfect competition is perfectly elastic. Perfectly elastic demand curve means any quantity can be sold only at a given price. Under perfect competition, the price of the product is determined by the industry by the forces of demand and supply and the firm has no option but to accept it. Uniform price prevails because all firms are selling a homogeneous product. A firm cannot influence or alter the price. Implying that a firm can sell any quantity at the given price. Therefore, the demand curve will be a straight line parallel to the X-axis as shown in Fig. ; which is perfectly elastic, showing Ed=infinity The demand curve under monopolistic competition is less than perfectly elastic. It means more can be sold only at lower price. Under monopolistic competition, the seller sells a differentiated product, so he exercises partial control over price. But he can sell more only by lowering the price; certainly not at the existing price. This is what makes the demand curve less than perfectly elastic.
Please refer to attached file for CBSE Class 12 Economics HOTs Economics Forms of Market and Price Determination