Topic 5 Perfect Competition

Question 1

Would a perfectly competitive firm engage in advertising? Explain.

Question 2

Consider total cost and total revenue given in the following table:

Quantity. 0 1 2 3 4 5 6 7

Total Cost.RM 8 9 10 11 13 19 27 37

Total RevenueRM 0 8 16 24 32 40 48 56

1. Calculate profit for each quantity. How much should the firm produce to maximize profit?
2. Calculate marginal revenue and marginal cost for each quantity. Graph them.
3. At what quantity do these curves cross?
4. How does this relate to your answer to part (a)?

Topic 7 Market Structure( Monopolistic Competition)

Question 1

Dollars per Unit NC ATE $20 AVE :1? 16 10 $ D D 100 Units Of Output per Week Figure 1 Big Brew High price Low price Brew makes Brew makes Enter RM3 million RM1 million Kona makes Kona losses Little RM2 million RM1 million Kona Don't Brew makes Brew makes RM7 million RM2 million Enter Kona makes Kona makes zero zero