Microeconomics DL Assignment

Q.1

a) Compare and contrast between the two extreme cases of price elasticity. (6marks)

b) Which of the two is more applicable in Zambia, give examples (7 marks)

c) Distinguish graphically the Short Run (SR) analysis of a firm operating under monopoly
and monopolistic market structures. (10 marks)

Q.2

a) The demand of a product will always determine the price of that commodity. (4marks)
b) One of the most important determinants of a consumer’s behavior is his or her tastes or
preferences. Discuss the three (3) basic assumptions that economists make about the nature of
the consumer’s tastes. (5 marks)
c) Distinguish perfect competition, monopoly, and monopolistic competition markets with
reference to the following:
i) Number of firms in the market (4 marks)
ii) Nature of the goods produced (4 marks)
iii) Freedom of entry and exit in the market (4 marks)
iv) Influence on the price of goods produced. (4 marks)

Q.3

a) Explain the shut – down of a perfectly competitive firm in the short run, illustrate your
answer graphically. (5 marks)

b) A market consists of three consumers whose demand curves are: P= 35-0.5Qa; P= 50-0.25Qb; and
P= 40-2Qc. Calculate the market demand for the commodity and the equilibrium output and price if
the supply function is given by Qs= 40+3.5P. (8 marks)

c) Illustrate your answer graphically, does it represent a surplus or a shortage. (7 marks)

d) Calculate the Total Revenue. (5 marks)

Q.4
a) Compare and contrast between accounting costs and economical costs. (6 marks)
b) Complete the table below by calculating the Total Variable Cost (TVC), Average Fixed
Cost (AFC), Average Variable Cost (AVC) and the Marginal Cost (MC). (17 marks)

Output Total Cost Total Total Average Average Marginal

(TC) Fixed Cost Variable Fixed Cost Variable Cost (MC)
 (TFC) Cost (AFC) Cost
(TVC) (AVC)
0 50 50
1 70 50
2 100 50
3 120 50
4 135 50
5 150 50