Consider the following statements regarding the effect of an increase in the number of firms on market equilibrium: 1. The supply curve shifts to the left. 2. The price of the commodity falls. 3. The total quantity produced in the market increases. Which of the statements given above is/are correct?

The correct option is 2 and 3 only. Explanation An increase in the number of firms in a market affects market supply by altering the aggregate quantity that producers are willing to sell at each price. Statement-wise Analysis: - Statement 1 - Incorrect. An increase in the number of firms causes the market supply curve to shift to the right, not to the left, as more producers contribute to total supply. - Statement 2 - Correct. A rightward shift of the supply curve, with demand remaining constant, leads to a fall in the equilibrium price of the commodity. - Statement 3 - Correct. The expansion in supply results in an increase in the total equilibrium quantity produced and sold in the market. Key Takeaway: Entry of more firms increases market supply, leading to a lower equilibrium price and a higher equilibrium quantity.

Consider the following statements regarding the effect of an increase in the… - NCERT Class 12 Economics MCQ

NCERT Class 12 Economics — Chapter 2: Market Equilibrium

mcqeasy

Consider the following statements regarding the effect of an increase in the number of firms on market equilibrium:

The supply curve shifts to the left.
The price of the commodity falls.
The total quantity produced in the market increases.

Which of the statements given above is/are correct?

NCERT textbook question

From NCERT Introductory Microeconomics · Page 79

Options

A1, 2 and 3
B2 and 3 only
C2 only
D1 and 2 only

Did you get this right?

Solution

The correct option is 2 and 3 only.

Explanation

An increase in the number of firms in a market affects market supply by altering the aggregate quantity that producers are willing to sell at each price.

Statement-wise Analysis:

Statement 1 - Incorrect. An increase in the number of firms causes the market supply curve to shift to the right, not to the left, as more producers contribute to total supply.
Statement 2 - Correct. A rightward shift of the supply curve, with demand remaining constant, leads to a fall in the equilibrium price of the commodity.
Statement 3 - Correct. The expansion in supply results in an increase in the total equilibrium quantity produced and sold in the market.

Key Takeaway: Entry of more firms increases market supply, leading to a lower equilibrium price and a higher equilibrium quantity.

Your note

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