ECON11026 Term 2 Assignment: Market Structures, Costs, and Profit

This economics assignment analyzes various market structures, primarily focusing on perfect competition and monopoly, through a series of short answer questions. The assignment requires the student to complete tables, calculate costs (total, average, and marginal), revenue (total and marginal), and profit. The student is also tasked with drawing and interpreting graphs illustrating cost curves, profit maximization points, and the effects of market structures on output and pricing. Furthermore, the assignment delves into the concepts of economic efficiency, deadweight loss, and the impact of externalities on market outcomes. The assignment also explores the relationship between marginal abatement costs and pollution reduction, as well as the impact of firms entering and exiting the market in response to economic profits.

qwertyuiopasdfghjklzxcvbnmqwe
rtyuiopasdfghjklzxcvbnmqwertyu
iopasdfghjklzxcvbnmqwertyuiopa
sdfghjklzxcvbnmqwertyuiopasdfg
hjklzxcvbnmqwertyuiopasdfghjkl
zxcvbnmqwertyuiopasdfghjklzxcv
bnmqwertyuiopasdfghjklzxcvbnm
qwertyuiopasdfghjklzxcvbnmqwe
rtyuiopasdfghjklzxcvbnmqwertyu
iopasdfghjklzxcvbnmqwertyuiopa
sdfghjklzxcvbnmqwertyuiopasdfg
hjklzxcvbnmqwertyuiopasdfghjkl
zxcvbnmqwertyuiopasdfghjklzxcv
bnmqwertyuiopasdfghjklzxcvbnm
qwertyuiopasdfghjklzxcvbnmqwe
rtyuiopasdfghjklzxcvbnmrtyuiopa
Economics
9/3/2019
(Student Name

Table of Contents
Question 1........................................................................................................................................2
(A)................................................................................................................................................2
(B)................................................................................................................................................2
(C)................................................................................................................................................2
(D)................................................................................................................................................3
(E).................................................................................................................................................4
(F).................................................................................................................................................4
Question...........................................................................................................................................5
A).................................................................................................................................................5
B)..................................................................................................................................................5
(C)................................................................................................................................................5
1)...............................................................................................................................................5
2)...............................................................................................................................................5
3)...............................................................................................................................................6
4)...............................................................................................................................................6
Question 3........................................................................................................................................6
(a).................................................................................................................................................6
(b).................................................................................................................................................6
C)..................................................................................................................................................6
ECONOMICS 1

(D)................................................................................................................................................6
(E).................................................................................................................................................6
(F).................................................................................................................................................7
Question 4........................................................................................................................................7
a)...................................................................................................................................................7
1)...............................................................................................................................................7
2)...............................................................................................................................................7
3)...............................................................................................................................................7
B)..................................................................................................................................................7
1)...............................................................................................................................................7
2)...............................................................................................................................................7
3)...............................................................................................................................................7
References........................................................................................................................................8
ECONOMICS 2

Question 1
(A)
Output per
day
Total
Cost TR$ ATC$ MR$ MC$ Profit$
0 20 0 10 -20
1 32 10 32 10 12 -22
2 37 20 18.5 10 5 -17
3 48 30 16 10 11 -18
4 61 40 15.25 10 13 -21
5 75 50 15 10 14 -25
6 92 60
15.3333
3 10 17 -32
7 113 70
16.1428
6 10 21 -43
8 136 80 17 10 23 -56
ECONOMICS 3

Working Notes:
1 TR= P*Q= $10*Q
2
MR= Price (since in perfect competition, P=
MR)= $10
3 ATC= TC/Q
4 MC= Change in TC/ Change in Q
Profit = TR-TC (Iossa
& Martimort,2015)
(B)
The profit will be maximized or loss will be minimized in the case where MR or price is
equal to or higher than, Marginal Cost (MC) (Lum, 2018).
Thus, Q=2, MR = 10 and MC = 5, it showcase that MR > MC.
Thus when Q = 3, MR = 10 AS WEL AS M = 11, then MR< MC.
Therefore, the loss minimizing output is Q = 3 with the Price = $10 as well as loss is
being $17 only in such situation.
ECONOMICS 4

(C)
Output
per day
Total
Cost
Fixed
Cost TVC AVC ATC$ MR$ MC$
0 20 20 0 10
1 32 20 12 12 32 10 12
2 37 20 17 8.5 18.5 10 5
3 48 20 28 9.33 16 10 11
4 61 20 41 10.25 15.25 10 13
5 75 20 55 11 15 10 14
6 92 20 72 12
15.3333
3 10 17
7 113 20 93
13.2857
1
16.1428
6 10 21
8 136 20 116 14.5 17 10 23
ECONOMICS 5

Working Notes:
1
TVC = TC-TFC= TC-20 (since when Q=0, TC = 20 that is equitant to fixed
cost)
AVC= TVC/Q
(Kagel, & Roth,
2016)
In the following graph, the loss is minimized at point A where MR (Price) intersects MC
with the output Q0 (= 3) as well as loss equal to the area ABEC
1 2 3 4 5 6 7 8
0
5
10
15
20
25
30
35 Chart Title
AVC
ATC$
MR$
MC$
Output
Price
C E
A B
(D)
Q TC TR= 20*Q ATC MR MC Profit
ECONOMICS 6

0 20 0 20 -20
1 32 20 32 20 12 -12
2 37 40 18.5 20 5 3
3 48 60 16 20 11 12
4 61 80 15.25 20 13 19
5 75 100 15 20 14 25
6 92 120 15.33333 20 17 28
7 113 140 16.14286 20 21 27
8 136 160 17 20 23 24
(E)
The profit will be maximized or loss will be minimized in the case where MR or price is
equal to or higher than, Marginal Cost (MC).
Thus, Q=6, MR = 20 and MC = 17, it showcase that MR > MC.
Therefore, the loss minimizing output is Q = 6 with the Price = $20 as well as Profit is
being $28 in such situation.
ECONOMICS 7

(F)
Q TC TFC
TR=
20*Q TVC ATC AVC MR MC
Profi
t
0 20 20 0 0 20 -20
1 32 20 20 12 32 12 20 12 -12
2 37 20 40 17 18.5 8.5 20 5 3
3 48 20 60 28 16
9.33333
3 20 11 12
4 61 20 80 41 15.25 10.25 20 13 19
5 75 20 100 55 15 11 20 14 25
6 92 20 120 72
15.3333
3 12 20 17 28
7 113 20 140 93
16.1428
6
13.2857
1 20 21 27
8 136 20 160 116 17 14.5 20 23 24
ECONOMICS 8

1 2 3 4 5 6 7 8
0
5
10
15
20
25
30
35
Chart Title
ATC
AVC
MR
MC
Quantity
Price E
Therefore, in the following graph point E is the place where MR=MC. It is one of the
points where Julie will minimize its loss in an effective manner.
Question 2
A)
Yes, as the only book store in the town, I will enjoy monopoly in the market due to the
main reason, the only one supplier of the books in the town create the situation of monopoly for
the seller in the market.
B)
The monopoly sets MC=MR for the maximization of profit as well as the curve of market
demand is also the demand curve of the firms. Therefore, setting MC=MR , it will produce Qm
Output as Pm price which is explained in the below graph (Lee, 2018 ).
ECONOMICS 9
100

The graph represent that the monopoly firm is inefficient as it produces low quality at a
higher price while comparing with the perfect competitive firm due to the main reason of
efficient, the puce must be set equal to the MC.
(C)
1)
The price that is charged is 32 and quantity produced is 50
2)
TR=P*Q = 50*32 = 1600
Where, TC=ATC*Q= 20*50=1000
3)
Profit = TR-TC
1600-1000 = 600
ECONOMICS 10
D
ATC
MR
MC
Qm
Pm

4)
If the industry was organized as a perfectly competitive industry then it will produce Q=80 units
at P=22.
Question 3
(a)
Quantity Price TR MR TC MC Profit
1 30 30 32 -2
2 28 56 26 43 11 13
3 26 78 22 53 10 25
4 24 96 18 64 11 32
5 22 110 14 76 12 34
6 20 120 10 90 14 30
7 18 126 6 106 16 20
8 16 128 2 126 20 2
ECONOMICS 11