Economics : 2012 : CBSE : [All India] : Set III

MR curve is a horizontal straight line parallel to X-axis and MR is equal to price.

Price maker firm is that firm who decide the price of a commodity.

Change in income

Total variable costs increases as output is increased.

Microeconomics deals with the individual parts of the economic system such as individual households, individual firms or industries.

The opportunity cost of an activity is equal to the value of next best alternative forgone. In other word, opportunity cost reflects the benefit we give up to select the most preferred choice. Example: a labour gets 100 per day for his work in industry but for that he foregoes 80 which he would have got for working in agriculture.

Implication of large number of sellers in the market is    that the share of each seller in total market supply is so small that no single seller can influence the price. As result each firm is said to be price taker in perfect competition.

In an oligopoly market, only a few firms exist so that each firm produces a substantial part of total output of the industry. The number of firms is so small that each seller knows that he can influence the price by his own action and he can provoke opponent firms to react.

In the above case, service of producer comes under implicit costs. As we know that implicit costs of self- owned or self-employed resources. Since, he borrows money for start the business, so interest payment on money comes under explicit cost. Explicit costs are those cash payments which firms make to outsiders for their services and goods.