Important Questions Class 12 Micro Economics Chapter 6

Important Questions Class 12 Micro Economics Chapter 6

Important Questions for CBSE Class 12 Micro Economics Chapter 6 – Non-competitive Markets

Students are familiar with what a competitive market entails, and in contrast, non-competitive markets also exist. Simple Monopoly and Oligopoly Markets are examples of non-competitive markets. A market is said to be non-competitive if the agents who work in it have the ability to influence the price, either directly or indirectly. This is not possible in the absence of perfect competition.

This chapter covers topics like Monopoly Market, Monopoly Market Features, AR or MR Curve in the Monopoly Market, Monopolistic Competition, Monopolistic Competition Features, AR or MR in Monopolistic Competition, Oligopoly, Oligopoly Features, Price Elasticity, and Marginal Revenue which are the characteristics of a monopoly.

Extramarks Important Questions for Class 12 Microeconomics Chapter 6 are useful for students to revise the chapter’s main topics in a question-answer format. It is efficient since these questions are compiled from past years’ question papers. Subject matter experts curate these questions, which cover all important aspects of the chapter.

CBSE Class 12 Micro Economics Chapter-6 Important Questions

Study Important Questions for Class 12 Micro Economics Chapter 6 – Non Competitive Markets

Given below are the Important Questions for Class 12 Micro Economics Chapter 6 in Short Answer Questions format, each for 3 or 4 marks. The full set of questions can be accessed by clicking the link provided.

Short Answer Questions – 3 or 4 Marks 

Q1. The market for a necessary good is competitive, with existing firms earning above-average profits. How can the government’s liberalisation policy help to make the market more competitive in the interests of consumers? Explain.

A1. The liberalisation strategy encourages new entrants into the industry. This increases the overall output of the industry.  Overall market demand remains stable, and prices begin to fall. As a result, consumers benefit from significantly lower prices.

Market barriers such as licensing quotas will be removed as a result of liberalisation policies. As a result, new companies will enter the market. This will boost market supply and increase market competition. Inferring a rightward shift in the market supply curve. Other things being equal, a shift to the right in the market supply curve leads to a decrease in equilibrium price and an increase in equilibrium quantity. Extraordinary profits will eventually be wiped out, and consumers can expect to get more for less.

Q2. Describe the effects of a “price ceiling.”

A2. Black marketing is the direct result of a price ceiling. It refers to a situation in which a commodity subject to the government’s control policy is illegally sold at a higher price than the government has set. It could happen primarily due to the presence of consumers who are willing to pay a higher price for the commodity rather than go without it.

Q3. Describe the effects of a “price floor.”

A3. Buffer stock is a valuable tool in the government’s arsenal for maintaining a price floor or minimum support price. If the market price is less than what the government believes farmers or producers should be paid. This will cause them to pay a higher price for the product from the farmers or producers in order to stock up on the commodity in case of future shortages.

Q4. The goods market is in equilibrium. The good’s demand “increases.” Describe the ripple effects of this change.

A4. Given that there is equilibrium in the market as demand rises, the following chain reactions can be observed:

  1. Excess demand emerges if the price remains constant.
  2. Prices rise as a result of increased competition among buyers.
  3. A price increase reduces or reduces demand while increasing or expanding supply.
  4. The price rises further until the market reaches equilibrium at a higher price.

Q5. The equilibrium price of a necessary medicine is far too high. What can be done to reduce the price using only market forces? Explain the series of market changes that will occur.

A5.  Medicine is a necessary good, and demand for it will be perfectly elastic.

The equilibrium price determined by the forces of supply and demand in the market is far too high..

Because it is a necessity, a price increase will not reduce demand, so the government should increase its supply. To increase supply, the government should lower taxes or provide subsidies.

As demand rises, the supply curve shifts to the right and the new equilibrium point is determined at point E1.

Because it is an essential good, it reduces the equilibrium price from OP to OP1 but has no effect on the equilibrium quantity (OQ).

FAQs (Frequently Asked Questions)

There are consequences when a product is subject to monopolistic competition, which makes it unique. Trademarks or brand names, sizes, numbers, and so on are frequently used to distinguish a product. Differentiated products are typically close substitutes for each other. Taj Mahal tea and Wagh Bakri tea are two examples. Because of product differentiation, each firm has the ability to set its own pricing policy. As a result, each company has limited control over the pricing of its product. This is done to entice buyers away from competitors. Furthermore, because these companies produce in large quantities and their products are unique, they always have some devoted customers who buy only these things.

When there are barriers to firm admission, it is usually higher. These constraints are nearly identical to those seen in monopolistic situations. A new firm may enter the market.  These barriers can be natural, such as the requirement for large sums of money or the need to operate at the lowest possible cost, or artificial, such as patent rights. They primarily keep new entrants from entering the market.

The consequences of homogeneous products are significant. This essentially means that the products are identical in nature, quality, size, shape, and colour. As a result, no producer can charge a higher price for the product. Pricing in the market is consistent. In a completely competitive market, commodities must always be identical. As a result, consumers or buyers have no reason to prefer one seller’s product over another.

They are only related in opposition to one another. The relationship exists solely to study the differences between these two extreme forms of markets, despite the fact that they are in no way related or interdependent in the real business world.

A perfect market is a financial market that does not meet the rigorous expectations of a theoretically perfectly competitive market. Perfect competition is obviously a hypothetical market structure in which a set of criteria is met. Because every real market exists outside the scope of this ideal model of competition, they are classified as non-competitive markets. Individual buyers and sellers can influence prices, production, and so on in imperfect markets, and product and price information is not fully disclosed. There are also significant entry and exit barriers in the market.