Microeconomics

Busi 1083: MICROECONOMICS

Assessments

Assignment #4 Questions

• Due no later than 11:00 p.m. on Sunday of Unit 8
• Weight5% of the final grade

Late Submission Policy

• This assignment is subject to the Late Submission penalty policy, namely 5% per day for three days.
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• In the event of an emergency that prevents you from submitting within this time frame, special permission must be obtained from your instructor. Documentation substantiating the emergency is required. If the extension is granted, the professor will reopen the submission function for you on an individual basis.
• Do not email your submissions to your professor, either before or after the due date. All coursework should be submitted through the online course (Moodle) only.

Description

Students are to complete assignments in Word (or some other compatible word processor; no PDF) and apply economic concepts learned in this course to the answers submitted for evaluation. Do not submit more than ONE document for your assignment.

1. For each of the following observations about an industry briefly explain why it characterizes a firm that is perfectly competitive or not perfectly competitive.(20 points)
2. The firms are spending lots of money on advertising.
3. The firms are currently making economic profits in the short run.
4. Two firms produce 60 percent of the total industry output.
5. The firms issue coupons offering a price discount.

 

2. Let’s compare the price and output decisions ofa competitive firm versus a monopoly. Examine Diagram 1 below and answer the questions that follow. (40 points)

 

Diagram 1

1. In Diagram 1 above, suppose the industry is a competitive one. What would be the price charged and quantity exchanged? Explain how you derived your answer. (10pts)
2. Now, assume Diagram 1 represents an industry that is a monopoly. What would be the prevailing price and quantity exchanged? Explain. (10pts)
3. Assume Diagram 1 represents an industry that is a monopoly. What would be the profit per week? Show your calculations. (10pts)
4. At what point (C, E, F, or G) on Diagram 1 does allocativeefficiency occur? Explain. (10pts)

 

3. Jackie, Jerry, and Johnny run the only saloon in town. Jackie wants to sell as many drinks as possible without losing money.  Jerry wants the saloon to bring in as much revenue as possible.  Johnny wants to make the largest possible profits.  Examine the monopoly diagram below that contains the demand, marginal revenue and cost curves of the saloon. Determine the price-quantity combination that fits each owner’s preference and explain the reason behind each of them. (40 points)