COPPERBELT UNIVERSITY

SCHOOL OF BUSINESS

BS110/BF110 TUTORIAL SHEET 5

1. If the demand and supply functions for pies in Kitwe were

Qd = 10000 – 1000p

Qs = -2000 + 1000p
a) Determine algebraically the equilibrium price and quantity for pies in Kitwe
b) Plot the market demand and supply curves and label the equilibrium point E
c) Draw the demand curve faced by a single pie shop in this market on the assumption
that the market is perfectly competitive
d) Show also the marginal revenue of the single firm on this figure.

2. Given the following information

/
Quantity 0 10 20 30 40 50 60 65 70 75 80 85 90
TVC 0 35 65 85 95 105 120 131 145 162 185 225 295
TC 65 100 130 150 160 170 185 196 210 227 250 290 360

You are also told that this firm sells its output at K4 per unit.

a) Determine the output and the total revenue at which this firm maximises total
profits.
b) If you plot the data, at what two levels does the firm break-even
c) Plot the total revenue and Total Cost curves and indicate the point of profit
maximization

3. Given the following data

;
Quantity 0 1 2 3 4 5 6 7 8
Price 8 8 8 8 8 8 8 8 8
Total 8 20 23 24 32 40 48 56 64
Cost

a) Generate the following information, Total Revenue (TR), Marginal Revenue (MR),
Average Revenue (AR), Marginal Cost (MC), Average Cost (AC) and Total profits at
each level of output.

1
b) Draw the graphs of the Total Revenue and Total Cost, at what point is profit
maximised
c) On a separate graph paper, draw the graphs of the Marginal Revenue, Marginal Cost
and Average cost curves.
d) At what point is profit maximised and at what cost per unit?
e) Do you see any relationship in the graphs at (b) and (c)?

4. Write brief notes on perfect competition (as a guide, state what this market structure is,
its assumptions, how profit is maximised, the long run equilibrium of the firm and the
advantages and disadvantages of perfect competition).

5. Consider a firm with the following price and cost structure

Output 0 1 2 3 4 5 6
Total 100 134 154 177 216 295 420
Cost
Price per 130 120 110 100 90 80
unit

a) Generate information on Marginal cost, Total Revenue, Marginal Revenue,

Average cost
b) At what price and quantity is the profit maximised?
c) What are the fixed costs for this firm?
d) What conditions is this firm producing under? Perfect competition or monopoly?

6. Write brief notes on Monopoly (as a guide, state what this market structure is, its
assumptions, how profit is maximised, the long run equilibrium of the firm and the
advantages and disadvantages of monopoly). Why is the firm the industry?

7. Write brief notes on Oligopoly (as a guide, state what this market structure is, its
assumptions, how profit is maximised and the advantages and disadvantages of
oligopoly). How does the leader firm emerge?

8. Write brief notes on monopolistic competition (as a guide, state what this market
structure is, its assumptions, how profit is maximised and the advantages and
disadvantages of monopolistic competition). Explain why the name of the market
structure sounds contradictory?

9. Consider the following table

Quantity 0 1 2 3 4 5 6 7
Price 12 11 10 9 8 7 6 5
Total 2 6 9 12 16 21 28 38
Cost

2
Generate your own information and draw the graphs showing profit maximisation. At
what quantity and price is profit maximised? What market structure is this?