Consider the demand and supply functions: and , where is the unit price and the choke price is Rupees 50. Identify which of the following statement(s) is/are CORRECT.
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IIT JAM 2026 Question 32: Perfect competition
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Consider the demand and supply functions: D(p)=400-8p and S(p)=2p, where p is the unit price and the choke price is Rupees 50. Identify which of the following statement(s) is/are CORRECT. (A) The choke price is equal to the market clearing price. (B) If a 25% ad valorem tax is imposed by the government, then the new market clearing price is equal to the choke price. (C) If a 100% ad valorem tax is imposed by the government, then the choke price still exists. (D) If a flat-rate tax of Rupees 10 per unit is imposed by the government, then the new market clearing price is equal to the choke price.
Perfect competition has come up 115 times in 7 exams since 2006.
What this question tests
This question is on Market equilibrium and comparative statics, part of Perfect competition in Microeconomics.
Finding equilibrium from demand and supply and tracing how it moves when either curve shifts.
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