Assignment No.

2
Instructions:
 There must be a title page consists of "the title and number of the assignment, the
course number and name, the due date, and your full name and student number".
 Write on white A4 paper on both sides, using a blue or black pen.
Write legibly – if a marker can’t read what you’ve written, your answer might as well
be wrong.
 If you make a mistake, use correction fluid or draw a neat line through the mistake. If
there are too many mistakes and your work looks messy, rewrite it.
 Use a ruler for tables and graphs.
 Underline headings.
 Stapling your assignment
 Staple multi-page assignments in the top left corner only.
 Note: Late submission will not be accepted and strictly discouraged this time.
 In case of any difficulty or problem, feel free to contact me.
Best of luck.
Question#1.

(Note: In this question you are required to only explain your answer theoretically. There is no
need to provide graphs and tables.)

Question#2.
(Note: In part (a) you are required to provide your answer after some necessary calculations
of the total cost for both technologies (A &B) for each output level (Q1,Q2,Q3 AND SO
ON…). You can find these cost by multiplying the price of labor and capital with units of
labor and capital and then take decision about the optimal number of labor and capital where
your total cost will be minimum.)

Question#3.
(Hint: To attempt part (a) you are just required to provide the values of MP and AP for each
unit of labor. For part (b) Plot the total production curve as you learned in the class and then
divide this curve in three stages. First stage will start from 0 to maximum of AP (Increasing
returns to labor) and second will start after maximum of AP and up to a point where your MP
is zero (Decreasing returns to labor). Finally, third stage will star after it (Negative returns to
labor).
To attempt C &D plot the curve of MP and AP and then answer the required information

Question#4.
(Hint: Just multiply price of labor and capital with units of labor and capital where each IQ
and its respective ISO cost line have same slope. In this way you can find total cost for each
level of production. And units of labor and units of capital are already given in the graph
where each IQ and its respective ISO cost line have same slope)
Question#.5
Prove that MC of a firm represents the supply curve of that firm. Furthermore, prove and
explain (Graphically and theoretically) that the only rising portion of MC is called Supply
curve of a firm.
Question#.6
Write a note on perfectly competitively market structure and compare it with monopoly,
monopolistic competition, and oligopoly. You are required to compare it based on the
following points.
1. Total production (Quantity), for examples, which market structure does produce more
among all market structures?
2. Price of the product (Price), for example, In which market structure firm charge high
price?
3. Efficiency. (Which market system does ensure maximum efficiency?)
4. Elasticity and shape of the demand curve (Shapes of demand curves and their
steepness)
5. Market Power (The power to influence the price of a product based on number of
firms and availability of substitute goods)
6. Short run Profit (All possible cases of profit and loss in short run in perfect
competition, monopoly and monopolistic competition)
7. Long run Profit condition.