Match List-I with List-II for a competitive firm:
| List-I | List-II | ||
|---|---|---|---|
| (A) | An organisational innovation by the firm | (I) | The firm pays a total tax of Rs 20 |
| (B) | A rise in the wage rate of labour | (II) | The MC curve shifts downward and the supply curve shifts to the right |
| (C) | The tax bill on 10 units sold under a unit tax of Rs 2 | (III) | The firm supplies a larger quantity along the same supply curve |
| (D) | A rise in the market price of the good | (IV) | The MC curve shifts upward and the supply curve shifts to the left |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A) - (II), (B) - (IV), (C) - (I), (D) - (III)
A change in technology or in input prices moves the MC curve, and with it the supply curve. A change in the market price only moves the firm along its supply curve.
| List-I | List-II | Reason |
|---|---|---|
| (A) An organisational innovation by the firm | (II) The MC curve shifts downward and the supply curve shifts to the right | The same inputs now give more output, so MC falls at every output and the firm supplies more at each price. |
| (B) A rise in the wage rate of labour | (IV) The MC curve shifts upward and the supply curve shifts to the left | A dearer input raises the cost of production, so MC rises and the firm supplies less at each price. |
| (C) The tax bill on 10 units sold under a unit tax of Rs 2 | (I) The firm pays a total tax of Rs 20 | The tax is paid on each unit sold: 10 × Rs 2 = Rs 20. |
| (D) A rise in the market price of the good | (III) The firm supplies a larger quantity along the same supply curve | The supply curve shows the output at each price. A higher price is a new point on the same curve. |
NCERT (2026-27): “4.5.1 Technological Progress … Subsequent to an organisational innovation by the firm, the same levels of capital and labour now produce more units of output. Put differently, to produce a given level of output, the organisational innovation allows the firm to use fewer units of inputs. It is expected that this will lower the firm’s marginal cost at any level of output; that is, there is a rightward (or downward) shift of the MC curve. As the firm’s supply curve is essentially a segment of the MC curve, technological progress shifts the supply curve of the firm to the right. At any given market price, the firm now supplies more units of output.” “4.5.2 Input Prices A change in input prices also affects a firm’s supply curve. If the price of an input (say, the wage rate of labour) increases, the cost of production rises. The consequent increase in the firm’s average cost at any level of output is usually accompanied by an increase in the firm’s marginal cost at any level of output; that is, there is a leftward (or upward) shift of the MC curve. This means that the firm’s supply curve shifts to the left: at any given market price, the firm now supplies fewer units of output.” “Impact of a unit tax on supply A unit tax is a tax that the government imposes per unit sale of output. For example, suppose that the unit tax imposed by the government is Rs 2. Then, if the firm produces and sells 10 units of the good, the total tax that the firm must pay to the government is 10 × Rs 2 = Rs 20.” |