Microeconomics Questions and Answers 2022

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

Microeconomics1
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................3
Answer 6..........................................................................................................................................5
Answer 7..........................................................................................................................................7
Answer 8..........................................................................................................................................8
References......................................................................................................................................10

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Answer 1
(a)
Figure 1: Single Seller Firm
Source: (Created by the Author)
In a market when there is only a single seller, it means the market is in monopoly market
structure. In monopoly market structure seller has the complete control over the market and can
charge any price it wants to as the buyers have do not have any other option or seller to buy from
(Dang, 2016). Thus, taking this advantage the seller charges price above free market price Pc and
also supplies less than free market quantity that is Qc. The price and quantity that single seller
offers is shown in the diagram above as P* and Q* respectively. Thus, consumer receives less
quantity at more price and hence there is loss of consumer surplus. Thus, the allocation made by
a single firm is an inefficient one.
(b)
The single market seller has advantages and disadvantages both. Mostly in case of this
market discussions are made on disadvantages such as consumer surplus loss, less productive,

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higher price, les innovation, negligible incentive for cutting cost and inefficient allocation
(Gordon, 2018). On the other hand, the advantages the market has are economies of scale, high
profit that can be invested for research and development, incentive of getting patent right and if
government regulates then fair price and more efficiency can be achieved since the single sellers
are highly efficient in what they produce. Thus, there are many advantages of the single market
seller but most are relative and regulation oriented but disadvantages are general and regular and
hence disadvantages over trumps the advantages.
Answer 2
Perfectly competitive market structure is the benchmark for efficient allocation because
in this market structure there are unlimited buyers and sellers and thus no one has market power
and thus price, demand and supply are determined by the free market forces (Wang & Lu, 2016).
Thus, there is no loss in surplus of the consumer or the producer and also there is no loss in
social welfare in the form of dead weight loss (Liu, 2015). In figure 2, it can be seen that the
price and quantity are determined by the demand and supply equilibrium and are given as P* and
Q* respectively.
Figure 2: Efficient allocation