Microeconomics

Assignment#3
Date of Submission: 12th January, 2023

Note: The assignment should be done on A4 size paper. Submit in hard copy.

Q#1. Find the TC, TFC, TVC, ATC, AFC, AVC, and MC using the following information

Q Units of Labor Units of Capital

0 0 10
1 3
2 5
3 6
4 7
5 9
6 12
7 16
8 21
9 27
10 34
Cost of Capital (K) is $2 per unit
Cost of Labor (L) is $_____ per unit (insert last two digits of your Student ID)

Also draw the cost curves for a typical firm in a graph.

Q#2. Based on the information provided in the table below, which of the three firms experiences
economies of scale, constant returns to scale and diseconomies of scale?
Output Firm 1 TC Firm 2 TC Firm 3 TC
1 $1000 $800 $800
2 $1800 $2000 $1600
3 $2550 $3300 $2400
4 $3300 $5000 $3200
5 $3900 $7500 $4000
6 $4200 $12000 $4800

Q#3. a. How does a competitive firm determine its profit-maximizing level of output?
b. Explain. When does a profit-maximizing competitive firm decide to shut down? When does
it decide to exit a market?

Q#4 Assume the following costs data are a purely competitive producer
TOTAL Total Cost
PRODUCT
0 3
1 5
2 8
3 12
4 17
5 23
6 30
7 38
8 47
9 57
10 68
At a product price of $6 will this firm produce in the short run? Why or why not? If it is
preferable to produce, what will be the profit-maximizing or loss-minimizing output? Explain.
What economic profit or loss will the firm realize per unit of output?

Q#5 Draw the demand, marginal-revenue, and marginal-cost curves for a monopolist. Show the
profit-maximizing level of output, the profit-maximizing price in this graph.

Q#6 Compare the characteristics of all types of markets with each other.