Eco Material

Market Structure
Assume the industry demand for an agriculture product is: P 900-200 Assume that
the marginal cost of product is $10 per unit. Calculate what the output and price shail be
for the firm under the perfect competition.
2. A firm in a perfectly competitive industry which happens to be in long run equilibrium,
charges $S for its product. Its Average Cost is given as: AC 50 - 6 0 0 . 2 0
a. How much economic profit is the firm earning? Explain.

b. How many units of output is the firm producing?
3. A firm in a perfectly competitive industry has the following short run total cost:
TC 2+ 4Q Q where Q is the number of units produced by the firm. Below what price
should firm shut down its operations?
4. Determine the best level of output for a firm that sells its product at P $4 and faces
the total cost function as TC = 0.01020+ 1000. Will the firm produce this level of
output? Why?
5. You are the manager of a monopolistically competitive firm that has a demand function
s
Q 30-2P. The firm has to pay a monthly rent of 200 and its variable cost component
is given as TVC = Q- 60. Find the profit maximizing level of output and corresponding
price. What should be the level of profit at the maximizing level of output and price?
6. For a monopoly firm, demand and total cost functions are given below:
Q= 360-20P and TC 6Q 0.05Q
Find how much he will produce and what price he will charge.
7. Given the linear demand function Q = 300-2P and cost function TC = 150+100 show the
output produced by a monopolist will be less than the output produced under perfect
competition.
8. A monopolist faces a demand curve P = 100-20. If the marginal cost is constant and is
equal to 20. What is the amount of profits made by the monopolist? What is dead-
weight welfare loss on account of monopoly?
Microeconomlcs: Numerlcals based on Cost, Revenue and market structure
1. For a manufacturing firm the total cost functlon Is given as
100+500 120 +"

Determine the following
a. Total fixed cost

b. Marginal cost functlon
C. Average cost functlon
d. Average Variable cost function
e. At what level of output AVC is minimum? How much is the MC at that level of
Output
2. A biscuit producing company has the following variable cost function
TVC 2000 9 0 + 0.2503
Total cost function, Marginal cost function, Average variable cost function
i) Calculate total cost when output level is 10 units
ii) At what level of output AVC and MC are equal?

iv) Calculate total cost at output level when AVC is minimum.
3. Fixed cost of a firm is R 10,000, AVC per unit of output is R15 and the firm sells its
product at t20 per unit.
a. Determine the break-even level of output
b. Suppose firm set the profit target of 20,000. Find out the level of output to achieve
the target level of profits.
Given the following total cost and revenue functions

TC 15,000+ 45Q
TR 75
Find the break-even rate of output.
Find the rate of output required to earn profits of R45,000.
Microconomics: Numericals based on Demand and Supply
1. The demand for wrist watches by Beyond Time Inc. in the year 2015 is given as
Qd 1000-P and supply equation is given by Qs = 100+4P. Calculate
a) Equilibrium price and

b) What is the excess demand or supply if the price are i) R500 and ii) R100
2. Refreshing Beverages Ltd. Is a multi-product firm engaged in the production of
'Coffee' are related in consumption.

consumption goods. Two of its products 'Tea' and
The past experience of the firm indicates the following relationship.
Year Coffee Qty coffee Income Tea (R/kg)

(R/Kg) bought(kg8) 35
95 20 1000
1000
98
1050 35
98
data.
Compute the relevant elasticities of demand from the above
Hint: Price Elasticity and Income elasticity.
and very sensitive to

3. The demand for housing is often described as being highly cyclical
describe the effect of the
housing prices and interest rates. Given these characteristics,
whether it would increase o r decrease the quantity
demanded or the
following in terms
demand for housing. Moreover, when price is expressed as a function ot quantity,
following is upward or downward

indicate whether the effect of each of the
an
demand curve or involves an outwards or inward shift in the

movement along a given
relevant demand curve for housing. Explain your answers.
a. An increase in housing price

b. A fall in interest rates
interest rates
C.A rise in
d. A severe economic recession
e. A robust economic expansion
Movers and Shakers Co. Pvt. Ltd. Concludes

that the demand function for its product X
3
is Qx 1000 -0.2Px +0.SPy +0.04Y 0.001A Price of Y (Substitute
Where, Qx =
Quantity Demanded of product X, Px
=
Price of x, Py =
Consumers income and A

= advertisement expenditure of the firm.
of X). Y =
R120, Y = R 10,000 and A R6000.

At present, Px =
R100, Py =
elasticity, income elasticity and cross-price elasticity.

Calculate price

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Market Structure

a. How much economic profit is the firm earning? Explain.

1. For a manufacturing firm the total cost functlon Is given as

100+500 120 +"

a. Total fixed cost

2. A biscuit producing company has the following variable cost function

TVC 2000 9 0 + 0.2503

ii) At what level of output AVC and MC are equal?

Given the following total cost and revenue functions

Qd 1000-P and supply equation is given by Qs = 100+4P. Calculate

a) Equilibrium price and

'Coffee' are related in consumption.

Year Coffee Qty coffee Income Tea (R/kg)

Hint: Price Elasticity and Income elasticity.

and very sensitive to

following is upward or downward

demand curve or involves an outwards or inward shift in the

a. An increase in housing price

e. A robust economic expansion

Movers and Shakers Co. Pvt. Ltd. Concludes

Consumers income and A

R120, Y = R 10,000 and A R6000.

elasticity, income elasticity and cross-price elasticity.

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