Microeconomics Answers

i. Explain how a monopolist chooses the quantity of output to produce and price to 

charge. Give graphical representation.

ii. Describe the ways policymakers can respond to the inefficiencies caused by the 

monopolies.

A firm in competitive market receives $600 in total revenue and has $10 as marginal revenue. 

What will be the average revenue and how many units were sold?

Why do competitive firms stay in Business if they make zero profit? Give reasons.

How a competitive firm does determine its profit maximization level of output? Explain. Also 

discuss when it will decide to shut down and exit?

1)     Consider a demand curve of the form Q_d = 20-2p where Q_d is the quantity demanded of a good and p is the price of the good. Also consider a supply curve of the form Q_s = 2p-4 where Q_s is the quantity supplied. Graph these curves. At what values of P and Q do these curves intersect?

2)     Now suppose at each price individuals demand four more units of output, that is the demand curve shifts to Q_dd = 24-2p.  Graph this new curves. Graph this new curve on the diagram drawn in part 1)  At what values of P and Q does the new demand curve intersect the supply curve identified in part 1)

Suppose that you are running a fast food chain business on a small stand near the Lake view park Islamabad. It’s a rainy day, and customers are lined up for burgers at your small stand. The following table shows your firm’s short-run production function for burgers. (10)

Number of workers Total Output

0 0

1 20

2 50

3 75

4 90

5 100

6 105

7 100

8 90

When does diminishing marginal product begin? How many workers are too many? Use marginal product to decide.

A baker thinks that there is a problem with the baked bread numbers in the bakery he is working. So, he started tracking the number of breads baked in the oven. About 7 days into the bakers monitoring, he had counted 120 baked breads, after 13 days he had counted 108. a. Write the equation that represents this situation (define your variable). b. Calculate the slope in the equation (show your solution). c. Draw a graph that will represent your slope intercepts. d. What is the correlation between the number of days and the baked breads in the bakery? e. Explain the cause and effect of the slope.

Q: 1 Suppose that you are running a fast food chain business on a small stand near the Lake view park Islamabad. It’s a rainy day, and customers are lined up for burgers at your small stand. The following table shows your firm’s short-run production function for burgers.​​ (10)

Number of workers

Total Output

1

20

2

50

3

75

4

90

5

100

6

105

7

100

8

90

When does diminishing marginal product begin? How many workers are too many? Use marginal product to decide

Why are price floors said to be inefficient? Can the government restore efficiency by imposing a production quota along with the price floor? Who benefits and who loses from such a program? 

The incidence of which of the following will entirely be on the monopolist?

A Specific tax

B Regulated monopoly pricing

C Lump-sum tax

D None of the above