Microeconomics Answers

b) The demand for a commodity is given by p = 400 – q. The average total cost of producing the commodity is given by 1000/q+100-5q+q2
where p is the price in shillings and q is the quantity in kilograms.

Required
i) What does in the ATC equation represent economically?
ii) Determine the output that leads to maximum profit and the profit at the level of output.

The price elasticity of supply is likely to be greater for motor vehicles in general than for a specialized market, such as sport utility vehicles.
1) True
2) False

Which oligopoly model(s) has(have) the same results as a competitive model?
1. Cournot
2. Bertrand
3. Stackelberg
4. Both Cournot and Stackelberg

When a monopolist engages in perfect price discrimination, …
1. the marginal revenue curve lies below the demand curve.
2. the demand curve and the marginal revenue curve are identical.
3. marginal cost becomes zero.
4. the marginal revenue curve becomes horizontal.

Under perfect discrimination, consumer surplus …
1. is less than zero
2. is greater than zero
3. equals zero
4. is maximised

The … elastic a firm’s demand curve, the greater its … .
1. less; monopoly power
2. less; output
3. more; monopoly
4. more; costs

A firm's demand curve is P = 1 – 2Q. The firm has a current price of R1 000 and it sells
100 units per day. What is the firm's price elasticity of demand?
1. – 1
2. – 2
3. – 5
4. Given the information, it cannot be determined.

The situation in which buyers are able to affect the price of a good is referred to as …
1. a monopoly
2. a monopsony
3. purchasing
4. countervailing

Lesedi is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal
revenue curve and total cost curve are given as follows:
Q = 160 – 4P TR = 40Q – 0.25(Q x Q) MR = 40 – 0.5Q TC = 4Q MC = 4

How much profit will she make?
1. 0
2. 1 296
3. 1 568
4. None of the above

Lesedi is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal
revenue curve and total cost curve are given as follows:
Q = 160 – 4P TR = 40Q – 0.25(Q x Q) MR = 40 – 0.5Q TC = 4Q MC = 4

How much output will Lesedi produce?
1. 0
2. 22
3. 56
4. 72