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Tamil Nadu Board 11th Standard Economics - Unit 5 : Book Back Answers and Solutions
This post covers the book back answers and solutions for Unit 5 – Economics from the Tamil Nadu State Board 11th Standard textbook. These detailed answers have been carefully prepared by our expert teachers at KalviTips.com.
We have explained each answer in a simple, easy-to-understand format, highlighting important points step by step under the relevant subtopics. Students are advised to read and memorize these subtopics thoroughly. Once you understand the main concepts, you’ll be able to connect other related points with real-life examples and confidently present them in your tests and exams.
By going through this material, you’ll gain a strong understanding of Economics Unit 5 along with the corresponding book back questions and answers (PDF format).
Question Types Covered:
- 1 Mark Questions: Choose the correct answer, Fill in the blanks, Identify the correct statement, Match the following
- 2 Mark Questions: Answer briefly
- 3, 4, and 5 Mark Questions: Answer in detail
All answers are presented in a clear and student-friendly manner, focusing on key points to help you score full marks.
All the best, Class 11 students! Prepare well and aim for top scores. Thank you!
Unit 5:Market Structure And Pricing
I. Multiple Choice questions.
1. In which of the following is not a
type of market structure Price will be very high?
a. Perfect competition
b. Monopoly
c. Duopoly
d. Oligopoly
Answer key:
a. Perfect competition
2. Equilibrium condition of a firm
is......
a. MC = MR
b. MC > MR
c.MC<MR
d. MR=Price
Answer key:
a. MC = MR
3. Which of the following is a
feature of monopolistic competition?
a. One seller
b. Few sellers
c. Product differentiation
d. No entry
Answer key:
c. Product differentiation
4. A firm under monopoly can earn
…………. in the short run.
a. Normal profit
b. Loss
c. Super normal profit
d. More loss
Answer key:
c. Super normal profit
5. There is no excess capacity under
…………………
a. Monopoly
b. Monopolistic competition
c. Oligopoly
d. Perfect competition
Answer key:
d. Perfect competition
6. Profit of a firm is obtained when
……………..
a. TR < TC
b. TR - MC
c. TR > TC
d. TR = TC
Answer key:
c. TR > TC
7. Another name of price is……………..
a. Average Revenue
b. Marginal Revenue
c. Total Revenue
d. Average Cost
Answer key:
a. Average Revenue
8. In which type of market, AR and MR
are equal …..
a. Duopoly
b. Perfect competition
c. Monopolistic competition
d. Oligopoly
Answer key:
b. Perfect competition
9. In monopoly, MR curve lies below
………….
a. TR
b. MC
c. AR
d. AC
Answer key:
c. AR
10. Perfect competition assumes …………
a. Luxury goods
b. Producer goods
c. Differentiated goods
d. Homogeneous goods
Answer key:
d. Homogeneous goods
11. Group equilibrium is analysed in
…….
a. Monopolistic competition
b. Monopoly
c. Duopoly
d. Pure competition
Answer key:
a. Monopolistic competition
12. In monopolistic competition, the
essential feature is ..…
a. Same product
b. selling cost
c. Single seller
d. Single buyer
Answer key:
b. selling cost
13. Monopolistic competition is a
form of .…….
a. Oligopoly
b. Duopoly
c. Imperfect competition
d. Monopoly
Answer key:
c. Imperfect competition
14. Price leadership is the attribute
of …………
a. Perfect competition
b. Monopoly
c. Oligopoly
d. Monopolistic competition
Answer key:
c. Oligopoly
15. Price discrimination will always
lead to………….
a. Increase in output
b. Increase in profit
c. Different prices
d. b and c
Answer key:
d. b and c
16. The average revenue curve under
monopolistic competition will be……
a. Perfectly inelastic
b. Perfectly elastic
c. Relatively elastic
d. Unitary elastic
Answer key:
c. Relatively elastic
17. Under perfect competition, the
shape of demand curve of a firm is...............
a. Vertical
b. Horizontal
c. Negatively sloped
d. Positively sloped
Answer key:
b. Horizontal
18. In which market form, does
absence of competition prevail?
a. Perfect competition
b. Monopoly
c. Duopoly
d. Oligopoly
Answer key:
b. Monopoly
19. Which of the following involves
maximum exploitation of consumers?
a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. Oligopoly
Answer key:
b. Monopoly
20. An example of selling cost is …
a. Raw material cost
b. Transport cost
c. Advertisement
cost
d. Purchasing cost
Answer key:
c. Advertisement
cost
II. Answer the following questions in one or two sentences.
21.
Define Market.
In
Economics, the term ‘market’ refers to a system of exchange between the buyers
and the sellers of a commodity directly or indirectly.
22. Who
is price-taker?
1. A price
taker is a seller who has no control to fix prices for a good or
service
23.
Point out the essential features of pure competition.
a. Large
Number of Buyers and Sellers
b. Free
Entry and Exit
24. What
is selling cost?
Selling
costs refer to those expenses which are incurred for
popularizing the differentiated product and increasing the demand for it.
25. Draw
demand curve of a firm for the following:
a) Perfect Competition b) Monopoly
26.
Mention any two types of price discrimination
(i)
Personal (ii) Geographical
27.
Define “Excess capacity”.
A
monopolistic firm produces deliberately output which is less than the optimum
output that is the output corresponding to the minimum average cost.
III. Answer the following questions in one paragraph.
28. What are the features of a market?
1. Buyers and sellers of a commodity or a service
2. A commodity to be bought and sold
3. Price agreeable to buyer and seller
4. Direct or indirect exchange.
29. Specify the nature of entry of competitors in perfect competition and
monopoly.
|
Nature of Entry of competitor
|
|
|
Perfect Competition
|
Monopoly
|
|
It is possible for the very efficient producer, producing the product at a very low cost, to earn
super normal profits. Attracted by such a profit, new firms enter into the
industry.
|
There is strict barrier for entry of any new
firm;
|
30. Describe the degrees of price discrimination.
According to A.C.Pigou, there are three degrees of price
discrimination.
(i) First degree price discrimination
A monopolist charges the maximum price that a buyer is
willing to pay. Example: Auctions
(ii) Second degree price discrimination
Under this degree, buyers are charged prices in such a
way that a part of their consumer’s surplus is taken
away by the sellers. Example: Cinema theatres .
(iii) Third degree price discrimination
The monopolist splits the entire market into a few
sub-market and charges different price in each submarket.
Example : Railways Ticket
31. State the meaning of selling cost with an example.
1. It was Chamberlin who introduced
the analysis of selling costs.
2. Selling costs play the key role
in monopolistic competition. The firms have to compete to promote
their sale by spending on advertisements and publicity
ads to the demand of the product.
3. In selling costs we include the
salaries of sales persons, allowances to retailers to display the
products etc. besides the advertisements.
32. Mention the similarities between perfect competition and monopolistic
competition.
|
s.no
|
Basis of Similarities
|
Perfect Competition
|
Monopolistic Competition
|
|
1
|
Number of Producers/
sellers
|
In numerable
|
Large
|
|
2
|
Entry / Exit
|
Free
|
Free
|
|
3
|
Profit
|
Abnormal profit in short- run, Normal profit in long-run
|
Abnormal profit in short-run,Normal profit in long run |
|
4 |
Quantity
|
Very large
|
Substantial
|
33. Differentiate between ‘firm’ and ‘industry’.
|
|
Firm
|
Industry
|
|
Meaning
|
A firm refers to a single production unit in an industry
|
An industry refers to a group offirms
|
|
Production
|
Production Producing a large or a small quantum of a commodity or service
|
Producing the same product or service in an economy. |
|
Example
|
A single cement firm
|
Cement Industry (group of firms)
|
34. State the features of duopoly.
1. Each seller is fully aware of his rival’s motive and actions.
2. Both sellers may collude (they agree on all matters regarding the sale of
the commodity).
3. They may enter into cut-throat competition.
4. They fix the price for their product with a view to maximising their
profit.
IV. Answer the following questions in about a page.
35. Bring out the features of perfect competition.
Meaning of Perfect Competition
Perfect Competition market is that type of market in
which the number of buyers and sellers is
very large, all are engaged in buying and selling a
homogenous product at uniform price.
Features
1. Large Number of Buyers and Sellers
The term, ‘large number of sellers’ implies that share of
each individual seller is a very, very small
quantum of a product.
2. Homogeneous Product and Uniform Price
All the units of the product are identical (ie) of the
same size, shape, colour, quality etc. Therefore,
a uniform price prevails in the market.
3. Free Entry and Exit
Efficient producer producing the product at a very low
cost, to earn super normal profits. Attracted
by such a profit, new firms enter into the industry.
4. Absence Of Transport Cost
The prevalence of the uniform price is also due to the
absence of the transport cost.
5. Perfect Knowledge of the Market
All buyers and sellers have a thorough knowledge of the
quality of the product, prevailing price etc.
6. No Government Intervention
There is no government regulation on supply of raw
materials, and in the determination of price etc.
Price & Output Determination-Perfect
Competition during Short Run
|
AR – Average Revenue
|
AC – Average Cost
|
|
MR – Marginal Revenue
|
MC – Marginal Cost
|
their quantities produced.
For example Qd= 100 – 5P and Qs=5P. At equilibrium Qd=Qs. Therefore
100-5P=5P.
100 = 10P; 100/10 = P Qd = demand P = 10 P = Price
Qd = 100-5(10) Qs = Supply 100-50 = 50
Qs = 5(10)=50
Therefore 50 = 50
Its total revenue is 50X10=500. Its total cost is
50X12=600. Therefore, its total loss is 600-500=100.
Price = AR=MR = Minimum AC
36. How price and output are
determined under the perfect competition?
Meaning of Perfect Competition
Perfect Competition market is that type of market
in which the number of buyers and sellers is
very large, all are engaged in buying and selling a
homogenous product at uniform price.
Important Features
1. Large Number of Buyers and Sellers 3. Homogeneous Product and Uniform Price
2. Free Entry and Exit 4. Absence Of Transport Cost
Price & Output
Determination-Perfect Competition during Short Run
AR – Average Revenue AC – Average Cost
MR – Marginal Revenue MC – Marginal Cost
The firms under Perfect Competition take the price
(10) from the industry and start adjusting
their quantities produced.
For example Qd= 100 – 5P and Qs=5P. At
equilibrium Qd=Qs. Therefore 100-5P=5P.
100 = 10P; 100/10 = P Qd = demand P = 10 P = Price
Qd = 100-5(10) Qs = Supply 100-50 = 50
Qs = 5(10)=50
Therefore 50 = 50
Its total revenue is 50X10=500. Its total cost is
50X12=600. Therefore, its total loss is 600-500=100.
Price = AR=MR = Minimum AC
37. Describe the features oligopoly.
1. Few large firms
Very few big firms own the major control of the whole
market by producing major portion of the
market demand.
2. Interdependence among firms
The price and quality decisions of a particular firm are
dependent on the price and quality decisions
of the rival firms.
3. Group behaviuor
The firms under oligopoly realise the importance of
mutual co-operation.
4. Advertisement cost
The oligopolist could raise sales either by advertising
or improving the quality of the product.
5. Nature of product
Perfect oligopoly means homogeneous products and
imperfect oligopoly deals with heterogeneous
products.
6. Price rigidity
The oligopolistic firms do not change their prices due to
the fear of rivals’ reaction.
38. Illustrate price and output determination under
Monopoly.
Meaning
Monopoly is a market structure characterized by a single
seller, selling the unique product with the
restriction for a new firm to enter the market.
Features of Monopoly
1. There is a single producer / seller of a product;
2. The product of a monopolist is unique and has no close substitute;
3. There is strict barrier for entry of any new firm;
4. The monopolist is a price-maker
Price & Output Determination Under Monopoly
Explanation
1. The Diagram shows that MC cuts MR
at E to give
equilibrium output as OM.
2. At OM, the price charged is OP (we
find this by extending line EM till it touches AR or demand
curve).
3. Also at OM, the cost per unit is
MS.
4. Therefore, profit per unit is SQ
or total profit is PQRS.
Total profit = (Average Revenue – Average Cost) X Total output
39. Explain price and output determined under monopolistic competition with
help of
diagram.
Meaning
Monopolistic competition refers to a market situation
where there are many firms selling a
differentiated product.
Important Features
1. Large number of buyers and many sellers.
2. Firms produce differentiated products.
3. Firms compete with each other by incurring selling
cost
4. Non – price competition
Short run Profit Short run Loss Long run Equilibrium
Explanation
1. The profit maximisation is achieved when MC=MR.
2. Total profit is ‘PQRS’. This is super normal profit
under short-run.
3. Total loss is ‘PQLK’. This firm incurs loss in the
short run.
4. In the long run AR curve is more elastic
5. At E’ point = AR=AC and MC=MR. It means that a firm
earns normal profit. AR is tangent to
the Long Run Average Cost (LAC) curve at point ‘Q’.
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