When a market is shared between a few firms, it is said to be highly concentrated. Firms are interdependent because each firm takes in to consideration the likely reactions of its rival firms when deciding its output and price policy. Subsidy is an aid in money. State the relation between marginal revenue and average revenue. https://www.zigya.com/share/RUNFTjEyMDQ0NjUx. Download the PDF Question Papers Free for off line practice and view the Solutions online. Suppose handloom cloth is subsidized at the rate of 10 paise per yard and sells at 90 paise per yard. It makes a firm dependent on other firms. At the end of the year any amounts they have sent home would be deducted from the U.S. GNP calculation and … Therefore, MR curve lies below the AR curve. The firm may have to reconsider the change in the light of the likely reactions. The average revenue (AR) of a firm is defined as total revenue per unit of output. 2. Oligopoly in a commodity market occurs when there are a small number of firms producing a homogenous commodity. We know GNP MP = NDP FC + Depriciation + Net Indirect Taxes - Net factory income to abroad Where, NDP FC = Compensation of employee + Interest + Rent + Profit + Mixed income of self-employed or, NDP FC = 2000 + 500 + 700 + 800 + 1500 = 5500 Substituting thei value in the formula for GNP MP GNP MP = 5500 + 100 + 250 - 150 = 5700 Thus, GNP MP is equal to Rs 5700 crore The government applies the GNP information in determining the resident’s total income and making policies about savings and policies. Thereafter, both AC and MC rise, but MC increases at a faster rate as compared to AC.As a result, MC curve is steeper as compared to AC curve. Gross National Product at Market Price! Both AC and MC curves are U-shaped due to the Law of Variable Proportions. One of the main characteristics of oligopoly market is interdependence. So, it can be also called as pure oligopoly. Why are the firms said to be interdependent in an oligopoly market? 1 per yard. Firms that are interdependent cannot act independently of each other. Oligopoly market structure consists of only a few firms. when MC and AC curves intersect each other at point A, AC is constant and at its minimum point.3. A firm operating in a market with just a few competitors must take the potential reaction of its closest rivals into account when making its own decisions. This is because when one firm lowers (rises) its prices, the rival firms may or may not follow suit. Thus, while the consumer pays 90 paise per yard, the factors of production will receive Re. For example, cement industry or chemical industry. 232, Block C-3, Janakpuri, New Delhi, A firm operating in a market with just a few competitors must take the potential reaction of its closest rivals into account when making its own decisions.

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