Microeconomics

ECON140
Tutorial revision CHAPTER 10,11 & 12
Question1
Fill in the following table for a product in a purely competitive market.
The market price for the good is $30. Use the total revenue–total cost
approach to evaluate at what quantity the firm can maximize its
profits.
 Total Price Total MC AC
=30 Revenue
product MR Total cost Tc/Q
output Profit/Loss
0 X 30= 0 - $50+0=50 - $_____
1X 30= 30 30-0=30 50+5=55 55-50=5 _____
2X 30= 60 60-30=30 50+15=65 65-55=10 _____
3X 30= 90 30 50+30=80 80-65=15 _____
4X 30= 120 30 100 100-80=20 _____
5X 30= 150 30 125 125-100=25 _____
6X 30= 180 30 155 155-125=30 155/6=25.8 180-155= $25
7X 30= 210 30 190 190-155=35 _____
8X 30= 240 30 235 235-190=45 _____
Question1
Fill in the following table for a product in a purely competitive market.
The market price for the good is $30. Use the total revenue–total cost
approach to evaluate at what quantity the firm can maximize its
profits.
Question2

Use the graph and the letters in it to answer these questions: (a) What
is the profit-maximizing level of output (Q*)? (b) What is the area of
economic profit? (c) What is the per-unit amount of profit at the
profit-maximizing level of output?
Question2

(A) To find Q* we have to look at MR and MC curves

• We can see MC cuts MR at point c , where MR= MC so Q* will be at point (n)
(B) Profit area between MR curve and AC curve
• Profit area = e c b f

(C) To find the per-unit amount of profit

at the profit-maximizing level of output
• Because at Q* price = e
AC= f
• It will be the difference between MR and AC point = e f
Question3
Use the graph to answer these questions for an unregulated pure
monopolist:
Question3

(a)What is the price and quantity that will be charged by the monopoly?
When MR= MC so Q* is (Q1) , and P* is (P1)

(b) Suppose the government were to break-up the monopoly and create a purely
competitive market. What is the price and quantity will the market move toward?
Will this outcome be more or less efficient?

The monopoly will produce at Q2 and price P2 (Like perfect competition firm)
More efficient , produce more at lower price