Courses

Courses for Kids

Free study material

Store

Talk to our experts

1800-120-456-456

Commerce

Chapter 10 Solutions for Class 12 Microeconomics by Sandeep Garg

Chapter 10 Solutions for Class 12 Microeconomics by Sandeep Garg

Q: 4. In a monopolistic competition problem, how should you account for 'selling costs' when calculating a firm's profit?

When solving problems for monopolistic competition, selling costs (like advertising expenses) must be treated as a part of the firm's total cost. The correct step is to add the selling costs to the total production cost to get the new, higher Total Cost (TC). This will also raise the Average Cost (AC) curve. The firm's profit is then calculated as Total Revenue (TR) minus the new Total Cost (TC), which now includes both production and selling expenditures.

Class 12 Microeconomics Sandeep Garg Solutions Chapter 10 – Main Market Forms

For Microeconomics Class 12 Chapter 10 Sandeep Garg, Vedantu has drafted the solutions of the chapter along with in-depth explanations of the various concepts. These solutions can help students prepare well for the examinations as they have been made as per the recent CBSE guidelines. Thus, students can understand the pattern of the answers expected by examiners and the various marking schemes, besides the types of questions that come in the examination. All these can give students a clear idea of how they need to prepare themselves to perform well in the examinations. The solutions can be a confidence booster for many students before the exam and help them prepare their best. Hence students must download Sandeep Garg Microeconomics Solution for Class 12 Chapter 10 from Vedantu for free to guarantee better results.

Market Structure

Vedantu offers students a massive opportunity to understand the concepts of the chapter through Class 12 Sandeep Garg Solutions Main Market Forms for Microeconomics. This chapter is based on the main market forms.

Meaning and Features of Market

The term market is not used in economics to refer to a physical location. Economists describe a market as a place where the buyers and sellers meet to exchange goods or services with each other. Thus a market is described as an arrangement where buyers and sellers interact directly or indirectly to exchange goods and services.

Features of Market

As a general rule, markets refer to markets for a single commodity or set of commodities.
The term market also includes both physical and geographical locations. It encompasses a general area as well as the forces of demand and supply in that area.
For a market to exist, there must be a group of buyers and sellers. And this group of buyers and sellers must have a business relationship with each other.
In order to sell and buy efficiently, both parties must have knowledge about the market

Types of Market

There are various categories of the market like:

Perfect competition
Imperfect competition
Monopoly
Oligopoly

All these forms of the market have been well explained, citing some appropriate examples.

Perfect Competition- In economic terms, perfect competition occurs when all firms have the same product offering, market share does not influence prices, firms can enter or exit the market with no barriers, buyers have full or perfect information, and firms cannot determine prices. This means that it is a market that is entirely dominated by market forces. Imperfect competition, on the other hand, reflects current market conditions more accurately. The concept of perfect competition is just a theoretical construct, and it does not exist in reality. This is because, in the long run, producers earn no economic profits.

Perfect competition has several features like:

A huge number of sellers and buyers.
Homogeneity in products.
No presence of selling costs.
Transportation costs are absent.
Exit and entry can depend on will.
It is obvious to both buyers and sellers what the price, utility, quality, and production methods of the product are.
In a perfectly competitive market, buyers and sellers incur no transaction costs.

Monopoly and oligopoly are components of imperfect competition. It refers to the presence of only one seller selling a product in the market without the presence of other substitute sellers. Monopolistic competition is a term used to refer to competition in the market among various sellers, selling similar products. Monopolistic competition describes a type of imperfect competition in which many producers compete with each other but sell products that are different in terms of quality, price, and other factors and cannot be perfectly substituted.

Features of Monopolistic Competition

A large number of sellers- A market with monopolistic competition has a large number of sellers with a small market share.
Product differentiation- Brands in monopolistic competition try to differentiate their products to create an element of monopoly over their competitors. This ensures that their products do not have a perfect substitute.
Freedom of entry or exit- In perfect competition, companies are free to enter and exit the market as they wish.
Non-price Competition- As a result of monopolistic competition, sellers compete on factors other than price, including advertising, product development, distribution, and after-sales service.

Oligopoly is also known as 'competition among the few. Oligopoly is a market situation where few sellers are selling homogeneous products in the market. Because there are few sellers in the market, every seller can affect the behavior of other firms and others can influence their behavior. Various markets in India are oligopolists, some of which are perfect, some of which are imperfect/differentiated.

There are several features in oligopoly:

Few sellers.
Dependence among each other.
Competition does not involve money.
Product quality.
Importance of costs of selling.
The behavior of groups.

Features of Oligopoly

After a clear definition of oligopoly, we can examine its characteristics:

New Firms

In an oligopolistic market, there are a few large firms, but the exact number is not known, and there is severe competition since each firm makes up a large share of the total output.

Barriers to Entry

Oligopoly can lead to very high profits in the long term since there are many barriers to entry, such as patents, licenses, and control over raw materials. These barriers make it difficult for new companies to enter the industry.

Non-Price Competition

Because firms fear price wars in Oligopoly, they utilize non-price methods such as advertising, after-sales service, warranties, etc. This allows them to influence demand and build brand recognition.

Interdependence

Due to the powerful holdings of a few firms in the industry, each firm's prices and production decisions are affected by those of its counterparts. In an oligopoly, firms are highly interdependent. Consequently, firms determine their price and output levels by taking into account the action and the reaction of their competitors.

Selling Costs

Among firms, there is a great deal of interdependence that makes avoiding price competition and lowering selling costs essential to competing for a larger market share against rivals.

These are the main components of Class 12 Microeconomics Main Market Forms, which students need to learn well to obtain good marks. They must download the Class 12 Sandeep Garg Chapter 10 PDF now!

Solved Examples

If a firm is placed under perfect competition, what is the shape of the demand curve?

a. Vertical

b. Horizontal

c. Negatively sloped

d. Positively sloped

Ans: b. Horizontal

Which of the following is correct with respect to a price-taking firm?

a. Marginal revenue = Price

b. Marginal revenue < Price

c. Marginal revenue > Price

d. The relation between marginal revenue and price is indeterminate.

Ans: a. Marginal revenue = Price

FAQs on Chapter 10 Solutions for Class 12 Microeconomics by Sandeep Garg

1. How can I find the correct, step-by-step solutions for the exercises in Chapter 10 of Sandeep Garg's Class 12 Microeconomics?

You can master the exercises in Chapter 10, 'Main Market Forms,' by following the detailed, step-by-step solutions provided by Vedantu. These solutions are crafted according to the latest CBSE 2025-26 guidelines, focusing on the correct methodology for determining firm equilibrium, calculating revenue, and analysing market features for each form of competition.

2. What is the correct method to determine a firm's equilibrium under perfect competition as per the CBSE syllabus?

To correctly solve for a firm's equilibrium in a perfect competition market, you must follow the MR-MC approach. The two primary conditions to check are:

Condition 1: Marginal Revenue (MR) must equal Marginal Cost (MC). Since Price (P) equals MR in perfect competition, this condition is P = MR = MC.
Condition 2: The Marginal Cost (MC) curve must be rising and cut the Marginal Revenue (MR) curve from below at the point of equilibrium.

Following these two steps ensures you accurately find the profit-maximising level of output.

3. Why is the Marginal Revenue (MR) curve horizontal in perfect competition but downward-sloping in a monopoly, and how does this change the solution for finding equilibrium?

This difference is fundamental to solving problems for each market. In perfect competition, a firm is a price-taker, meaning it can sell any quantity at the prevailing market price. Therefore, the additional revenue from selling one more unit (MR) is always equal to the price, resulting in a horizontal MR curve (MR = AR = Price). In a monopoly, the firm is a price-maker. To sell more, it must lower the price for all units, causing the MR to fall faster than the Average Revenue (AR), or price. This results in a downward-sloping MR curve that lies below the AR curve. This distinction critically affects the equilibrium solution: while both markets use the MR=MC condition, the calculation of MR is direct in perfect competition (it's the price) but requires a derived calculation from the demand curve in a monopoly.

4. In a monopolistic competition problem, how should you account for 'selling costs' when calculating a firm's profit?

When solving problems for monopolistic competition, selling costs (like advertising expenses) must be treated as a part of the firm's total cost. The correct step is to add the selling costs to the total production cost to get the new, higher Total Cost (TC). This will also raise the Average Cost (AC) curve. The firm's profit is then calculated as Total Revenue (TR) minus the new Total Cost (TC), which now includes both production and selling expenditures.

5. How does the feature of 'interdependence' in an oligopoly complicate solving for a firm's equilibrium price and output?

Interdependence is the key challenge in solving oligopoly problems. Because there are only a few firms, one firm's decision on price or output directly impacts the others, leading to a reaction. This creates uncertainty, as a firm cannot determine its demand curve (and thus its MR curve) without knowing how its rivals will react to its decisions. In the CBSE curriculum, this complexity is why there is no single, determinate equilibrium solution for an oligopoly. Instead, solutions often rely on simplifying assumptions or focus on explaining the price rigidity using the concept of a 'kinked demand curve'.

6. What is the step-by-step approach to solving the unsolved numerical problems for Chapter 10, 'Main Market Forms'?

To solve the unsolved numericals for Main Market Forms, follow this structured approach:

Identify the Market Form: First, determine if the question is about perfect competition, monopoly, or monopolistic competition based on the given information (e.g., is price constant, is there a single seller).
List Given Data: Write down all the given values, such as the demand schedule, cost function, or fixed price.
Determine the Equilibrium Condition: Apply the universal profit-maximisation rule: MR = MC. Calculate MR and MC from the data provided.
Solve for Equilibrium: Find the quantity where MR equals MC. For perfect competition, this is where Price = MC.
Calculate the Final Answer: Use the equilibrium quantity to calculate what the question asks for, such as total profit (TR - TC), super-normal profit, or loss.

7. What is a common mistake when solving for a firm's shutdown point versus its break-even point?

A common error is confusing the conditions for these two points. The break-even point occurs where the firm earns zero economic profit. The correct condition for this is Price (AR) = Average Cost (AC). In contrast, the shutdown point is the level of output where the firm is indifferent between producing and shutting down temporarily because it is just covering its variable costs. The correct condition for this is Price (AR) = Average Variable Cost (AVC). Mixing these two conditions leads to incorrect conclusions about a firm's profitability and its decision to continue operations.