Competitive Market Profit Assignment Report

Running head: MICROECONOMICS
Microeconomics
Name of the Student
Name of the University
Course ID

MICROECONOMICS1
Table of Contents
Question 1...................................................................................................................................................2
Question a................................................................................................................................................2
Question b...............................................................................................................................................2
Question c................................................................................................................................................2
Question d...............................................................................................................................................3
Question 2...................................................................................................................................................3
Question a................................................................................................................................................3
Question b...............................................................................................................................................4
Question 3...................................................................................................................................................4
Question a................................................................................................................................................4
Question b...............................................................................................................................................5
Question 4...................................................................................................................................................5
Question a................................................................................................................................................5
Question b...............................................................................................................................................6
Question 5...................................................................................................................................................7
Question a................................................................................................................................................7
Question b...............................................................................................................................................7
References...................................................................................................................................................9

MICROECONOMICS2
Question 1
Table 1: Demand, Revenue and Cost
Question a
Under perfectly competitive market profit maximization occurs price equals marginal cost of
production (Perea, 2017). From the demand and cost schedule as described above marginal cost is 1000
all over the production range. Price equals $1000 corresponding to the output level of 12,000. Therefore,
if the market for robots was perfectly competitive price and quantity would be $1000 and 12,000
respectively.
Question b
In there were only one supply that makes the market monopoly then equilibrium price and
quantity would be determined corresponding to the point where marginal revenue equals marginal cost.
The monopolist will produce up to the point where marginal revenue is either greater or equal to the
marginal cost (Kreps, 2019). The optimal decision for the monopolist is to produce 6000 robots at the
price of $7,000. Beyond 6000 units of robot marginal revenue is less than marginal cost. Therefore, price
and quantity in the market in the presence of monopoly supplier would be $7000 and 6000 respectively.
Question c
If two firms formed a cartel, then they would behave like a monopolist. The market price and
output would be same as that of the monopoly. That is price of robots would be $7000 and quantity of
robots would be 6000. If the two firms split the market, then Firm A would product half of the total
output. The production of robots by firm A then would be (60000/2) = 30000.
Corresponding profit of firm A can be obtained as
Profit=Total Revenue−Total Cost