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Computer Company assembles personal computers and sells them in the retail marketplace. The company is organized into two profit centers: the assembly division and the distribution division. The demand curve facing the company (and the distribution division) is P=3,500 – 10Q. The marginal cost for assembly (which includes purchasing the parts) is constant at $450. The distribution division faces constant marginal distribution costs of $50 per unit.
A. What is the profit-maximizing retail price and output for the firm as a whole?
B. If the assembly division has monopoly power to set the transfer price, what transfer price will it select (assuming it knows all the information above)? Calculate the profits for the two divisions in this case.
The President, who was stepping down at the end of his term, was giving a speech on the state of the economy. He said: ‘I have presided over many years of low unemployment and very low inflation but I admit that in the last two years things have not been so stable. On a positive note, unemployment has been even lower than normal but the inflation rate has crept up to 7%. Next year inflation is forecast to be 12%, but that is for the next president to deal with.’ i) What causes inflation in an economy, and what could have caused inflation to increase so dramatically over the past two years? ii) What policy actions should the next president take to combat this rising inflation and how would these work? iii) What desirable macroeconomic goals may have to be sacrificed to deal with the current inflationary situation?
The salary of the highest-paid footballer could buy the services of 1,000 doctors or 2,000 lecturers. This is evidence that A the market economy is highly inefficient. B the market economy is highly efficient. Which of the above (A or B) is true and why?
2.6 Discuss how a cut in the budget of NSFAS would affect students learning in SA
(20)
2.5. Explain the economic impact of COVID 19 on the South African economy (20)
2.5. Explain the economic impact of COVID 19 on the South African economy (20)
What is industrialisation?
Question 12
Which one of the following statements about a monopoly is true?
A. The monopolist has a flat demand curve because of high barriers to entry.
B. For a monopolistic firm, profit will be maximised where P = MR.
C. In the long run, a monopolist can earn only normal profits.
D. Price in the long run is not usually equal to minimum average total cost.
E. A monopolist will always make economic profit in the long run.
Question 13
If a monopoly market were to be replaced with a perfectly competitive market for the same
product and with the same cost structure, we would expect:
A. prices to increase, output to increase and efficiency to increase.
B. prices to increase, output to decrease and efficiency to decrease.
C. prices to decrease, output to increase and efficiency to increase.
D. prices to decrease, output to decrease and efficiency to decrease.
E. prices to remain unchanged, output to decrease and efficiency to increase.
The market for lemon has 10 potential consumers, each having an individual demand curve P = 101 - 10Qi, where P is price in dollars per cup and Qi is the number of cups demanded per week by the ith consumer.
A. Find the market demand curve using algebra.
B. Draw an individual demand curve and the market demand curve
