St.

Mary’s University

Faculty of Business

Department of Management

Microeconomics group assignment

Name: _______________________________

ID. No: _______________________________

Department: __________________________

Program: Degree

Instructions:

 This is the only group assignment of this course

 Number of students in one group is not more than 6.
 This assignment is to be completed and submitted to instructors before August 20 ,2022
or deadline to submit this assignment will be on August 20,2022
 Any kind of copy is series consequences.
 Do all questions and show all necessary steps and explain it, if it is necessary.

1.Suppose that , firm under perfectly competition market produce two commodities X 1 and
X2 with corresponding prices birr 10 and birr 15 . If cost function of the firm is

TC= 2x12 +x1x2+2x22 where x1 and x2 denote the level of output, then, determine the following
questions.

i. Profit maximizing level of output x1 and x2

ii. The amount of maximum profit

1|Page Compiled by Assefa Belay (MA in Economics)

2. Perfectly Competitive firm faces a market price of birr 40 and has the following

Cost function: STC = 5800+ 20Q+0.02Q2.

A. What quantity of output is best for this firm in the short-run? Why?
B. Should firm attempt to change some price other than the market price of 40? Why or
why not?

3. Suppose that, there is a perfectly competitive industry where all the firms are identical with
identical cost curves. Furthermore, suppose that a representative firm’s total cost is given by the
equation TC = 100 + q2 + q where q is the quantity of output produced by the firm. You also
know that the market demand for this product is given by the equation P = 1000 – 2Q where Q is
the market quantity. In addition you are told that the market supply curve is given by the
equation P = 100 + Q. Then

i. What is the equilibrium quantity and price in this market given this
Information?

ii. The firm’s MC equation based upon its TC equation is MC = 2q + 1.

Given this information, what is the firm’s profit maximizing level of production, Total Revenue
(TR), Marginal Cost (MC), Marginal revenue (MR), Total Cost (TC) and profit (π) at this market
equilibrium? Is this a short-run or long-run equilibrium? Explain your answer.

4. Distinguish between market period, Short-run and long run. Does the consideration of period
affect the price policy?

5. Given the following demand and cost function, find the prices and output in each Market and
the total profit, Assume that there are only two firms in the market.

P1 = 32 – 2Q1

P1 = 22 – Q2

TC = 10 + 2Q1 + Q2

2|Page Compiled by Assefa Belay (MA in Economics)

6. Given the demand function P=150 -0.5Q and the total Cost function TC=8Q

A. Maximize profit for a monopoly firm

B. Maximize profit for a perfectly competitive firm

C. Calculate the profit that monopolist lost to act as a perfectly competitive firm

7. A monopolist’s demand and Average total has cost functions are given by

Q=250-5P

ATC =10 +40/Q

A. What will be the profit maximizing level of price and output?

B. What will be the firm’s total profit if it exercises first degree price discrimination?

C. Assume the monopoly can sell his product in two separated markets with

the following demand functions

Q1 =110-P1

Q2=140-4P2

A. Determine the profit maximizing level output in each market

B. What price should the monopoly sell each unit of output in each market?

C. In which market is the price high? Why?

8. Given the market demand Q =100-P if the market supply function for the smaller firms is
given by SS=0.5P. And the Total cost function of the dominant firms is TC=10+40Qd, where
Qd, output of the dominant firm.
A. Find the demand function for the dominant firm.
B. Find the market a price and output of the dominant firm at equilibrium.
C. Find the out- put level to be supplied by the smaller firms.

3|Page Compiled by Assefa Belay (MA in Economics)

9. Assume that the Market demand is given by Q = 150 -2P and the cost function of the two
firms are C1=5Q1& C2=11Q2. Give the above information find
A. Which firm is low cost leader?
B. The profit maximizing level of output for firm 1
C. The profit maximizing level of price for firm 1
D. The profit maximizing level of output for firm 2
E. The profit maximizing level of output for firm 2
F. Find profit of firm 1 and firm 2
10. Assume that the Market demand facing the members of a cartel (firm 1 and firm 2) is
P = 60-2 (y1+y2) and cost of production form firm 1 is given by C1= (Y1)2, and for firm 2 is
C2= 4y2. Based on this information, answer the following questions.
. A. What are the levels of output that maximizes the joint industry’s profit?
B. What is the joint profit maximizing price?
C. Find profit for firm 1 and firm 2

4|Page Compiled by Assefa Belay (MA in Economics)