MICROECONOMICS I (EMIB113)
TUTORIAL 5
1. Explain the characteristics for:
a. Perfect competition
b. Monopoly
c. Monopolistic Competition
d. Oligopoly
2. With the aid of diagrams, discuss the short run equilibrium of a firm under
Perfect Competition
3. Explain the shutdown point of perfect competition.
4. Discuss barriers to Entry for Monopoly.
5. Can perfect competition implement price discrimination? Explain why.
6. Discuss barriers to entry to new firms in an oligopoly market.
7. Identify the type of profit is an oligopoly firm earn in the long- run.
8. Identify the differences between perfect competition and monopoly.
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9. A firm operating in a perfectly competitive industry faces cost curves as shown in
the diagram below.
Price/cost
AR =MR
Output
a) On the diagram ;
i. Label the cost curves in the box provided
ii. mark ‘Q’ for the profit maximizing output.
iii. mark ‘P’ for the equilibrium price.
iv. mark ‘AC’ for average cost at the profit maximizing output
v. mark ‘AVC’ for average variable cost at the profit maximizing output
b) The type of profit earned by this firm is _________________ profit.
c) Is the firm operating in the short run or long run ? ___________________
d) Given that Q = 20 units, P = RM 12, AC = RM 14, and AVC = RM 9,
compute ;
i. TR
ii. TC
iii. TFC
iv. TVC
e) Losses if continue operation
f) Should the firm continue or cease operation ? ________________
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10. The graph given below shows the average cost, marginal cost, demand and
marginal revenue curves for a monopoly firm.
Price / cost (RM)
M AC
17 C
15
10
AR
M
R Units of output (unit)
0
500 800
a) What is the equilibrium price and output of the firm?
b) Calculate the total profit / loss that the firm earns at equilibrium
c) What type of profit is the firm earning?
d) Is this firm operating in the short run or long? Give your reason.
11. Total cost and marginal cost equations are given by:
The market demand curve is given by: P = 210 – 3Q. Where Q is the number of
rides and P is the price in Ringgit Malaysia (RM).
a) Determine the profit maximizing level of output and the price.
b) Calculate the profit of the firm and identify the type of profit.
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12. The diagram below shows a long run equilibrium.
Revenue/cost
B
33
30
24
10
Quantity
20 30
a) Label curves A and B.
b) Assign label ARpc to the demand curve of a perfect competition firm and ARm
to the demand curve of a monopoly.
c) The profit maximizing output for a perfect competition firm is _______ units
and price
is RM ________
d) The profit maximizing output for a monopoly firm is _______ units and price is
RM ________
e) Total revenue for a monopoly firm is RM _____________ and total cost is
RM ______________
f) The type of profit for the perfect competition firm is ______________
h) The monopoly firm earned such profit in the long run because
___________________
