Microeconomics Study Material with Solved Assignments and Essays - Desklib

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....................................................................................................................................4
Question 2........................................................................................................................................5
Question a....................................................................................................................................5
Question b....................................................................................................................................7
Question 3........................................................................................................................................7
Question 4........................................................................................................................................8
Question 5......................................................................................................................................13
Question a..................................................................................................................................13
Question b..................................................................................................................................14
Question 6......................................................................................................................................15
Question a..................................................................................................................................15
Question b..................................................................................................................................15
Question c..................................................................................................................................17
Question d..................................................................................................................................17

MICROECONOMICS2
Question 1
Question a
Short run cost function of the competitive firm is given as
C=50+5 q+ q2
Marginal cost refers to change in total cost due to unit change in output. Given the total cost
function, marginal cost function can be determined as
Marginal cost ( MC ) =Change∈total cost
Change∈ output
¿ d ( TC )
dq
¿ d (50+ 5 q+q2 )
dq
¿ 5+2 q
Firm maximizes profit where marginal revenue of firms equal marginal cost. In a competitive
market, firms act as a price taker. As price is given in the market, marginal revenue of the firm is
fixed. Profit maximization condition in the competitive market thus reduces to price equals
marginal cost. Given the market price of $35, the profit-maximization output level of
competitive firm can be determined as
Price=Marginal cost
¿ , 35=5+ 2q
¿ , 2 q=35−5

MICROECONOMICS3
¿ , 2 q=30
¿ , q= 30
2
¿ , q=15
The profit maximizing output for the competitive market is obtained as 15. Total revenue of firm
is obtained from multiplying total quantity sold by per unit of price. Total revenue of the
competitive market thus can be determined as
Total Revenue=Price× Quantity
¿ $ 35× 15
¿ $ 525
Profit is the difference between total revenue and total cost.
Total cost of the competitive firms is obtained as
Total Cost =50+5 q+ q2
¿ 50+ ( 5 ×15 )+ ¿
¿ 50+75+225
¿ $ 350
Profit=Total revenue−Total cost
¿ $ 525−$ 350
¿ $ 175