Microeconomics Assignment: Complete Solutions and Explanations

This document presents solutions to a series of microeconomics questions, primarily in a multiple-choice format. The answers cover topics such as profit maximization, market structures (including natural monopolies and price takers), cost curves, revenue curves, and pricing strategies. Some questions were noted as unclear or missing from the original assignment. Key concepts addressed include the conditions for shutting down production temporarily, economies of scale, price discrimination, network externalities, game theory, and the behavior of firms in different market conditions. Several questions refer to specific figures (8-1, 8-4, 8-8) and graphs, analyzing the impact of price changes and cost structures on a firm's output decisions and profitability. This solved assignment is available on Desklib, a platform offering study tools and resources for students.

Running Head: MICROECONOMICS
Microeconomics
Answers to the Questions Provided

MICROECONOMICS Page 1 of 4
All the questions provided in the zip folder have been answered. There were some questions
missing and have been highlighted in the table below. Some were not clear in the picture.
Question Number Option Answers
2. D total profits
3. A they are often regulated
natural monopolies
4. Question not clear
5. D Price taker
6. A it is an industry in which
there is a single seller
7. C when the slope of the total
revenue curve exceeds the
slope of the total cost curve
8. A shut down temporarily
9. A there will be a decrease in the
total fixed costs and an
increase in profits
10. Question not clear
11. B large economies of scale
13. A $45
14. Question not clear
15. D when the market price falls
below $45
16. B Q1
17. C decrease the production of
output
18. Question not clear
19. Question not clear
20. C maximise their profits by
acting in ways to minimize
damage from competition
21. B OGAD

MICROECONOMICS Page 2 of 4
22. C when TR < TVC
23. A decrease both output and
price
24. B a positive network externality
where a consumer’s demand
for a product increases
because others own it
25. B when it believes senior
citizen demand is more
elastic than other demanders
26. D price discrimination
27. D firms will exit the industry if
economic profits equal zero
28. C because they are uncertain as
to how their competitors will
react
29. D when marginal cost equals
marginal revenue
30. B continue operating at that
output level in the short term
since TR will cover all of the
firm’s VC and some of the
FC
31. Question not clear
32. D identical products
33. B the strategy that is optimal
regardless of the actions of
the other firms
34. B when the number of people
purchasing a good influences
quantity demanded
35. C natural monopoly
36. D repeated games
37. C each player chooses the best
strategy given the strategies
of the other player
38. A where marginal revenue
equals 0

MICROECONOMICS Page 3 of 4
39. A it will be relatively elastic
40.
41. D
(refer to fig 8-1) (graph A
and B together)
it is a firm that is a price
taker
42. C $0
43. B the price taking behaviours
of oligopolists
53. A It is equal to $1.90
54. A shut down at least
temporarily
Figure 8-1 (question number
not clear)
D both the market price and the
price f the price-taking firm
have risen to $6
Figure 8-4 (question number
not clear)
C
(when price decreases from
to $4.70 in graph B)
decrease the production of
output
Figure 8-8 (question number
not clear)
D
(9th picture in the zip folder)
CDE portion of MC curve
represents the supply curve
Figure 8-4 (question number
not clear)
B
(when price increases from
$4.90 to $5 in graph B)
increase the production of
output
Figure 8-4 A
(Graph A)
a price taking firm
experiencing a loss of $80