Draw and discuss the major differences between the demand curve faced by a firm in perfectly competitive market and a firm in monopoly market

 

Part 1 (CLO1)

Question 1                                                                                         4 marks

 

An economy produces both mops and brooms. Use the production possibilities curve to answer the following questions.

 

 

1) The table below shows the output combinations for the points B and C mentioned on PP1. Find the opportunity cost in moving from B to C.                                                       (1 mark)

Point	Output of mops	Output of brooms
B	50	0
C	30	25

 

 

 

 

 

 

2. The economy strives to shift from PP1 to PP2. Discuss ways in which the economy reach PP2.                                                                                     (2 marks)

 

 

 

 

 

 

3. Assume that at A, the economy can produce 10 mops and 10 brooms. Is it economically efficient? Why? (1 mark)

 

 

 

 

 

Part 2(CLO2)

 

Question 1                                                                                        3 marks

 

Assume UK and Russia produce both grapes and cloth.

 

 

Output in units	UK	Russia
Grapes	45	65
Cloth	100	45

 

1) By the theory of absolute advantage which country should specialize in Grapes? Which country should specialize in clothes? Critically comment on the applicability of the theory.

 (1 mark)

 

 

 

 

 

 

 

 

 

 

2) Who has a comparative advantage in flowers? Who has a comparative advantage in cloth? Explain your answer by calculation of opportunity costs. (2 mark)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question 2                                                                                              3 marks                                                      

Assume that the apartments market in the United Arab Emirates (UAE) is in equilibrium. Use suitable graphs indicate what will be the change in equilibrium price and quantity in response to the following determinants. You are expected to draw three different graphs.

1. The number of residents decrease.

 

1. The uncertain business climate of 2020(oil price crisis and COVID-19) decrease the consumer income.

 

1. The government announces a rent ceiling which is above the equilibrium rent.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Part 3 (CLO3)

Question 1                                                                                         5 marks

1. a) The number of new apartments demanded in a city dropped from 40,000 to 37,500 as the result of a rent increase from $1180 to $2110 per month. Calculate the price elasticity of demand for apartments. Use the midpoint formula. Are they elastic/inelastic/unit elastic? (3 marks)

 

 

 

 

 

 

 

 

1. b) When the average consumer income in a county in the UK increased from £21,000 to £22155, the number of movie tickets bought increased from 2350 to 2800 per month. Calculate the income elasticity of demand using the midpoint formula. Discuss the nature of the product. (2 marks)

 

 

 

 

 

 

 

 

 

 

 

 

 

Question 2                                                                                                           5 marks

Tom is the brand manager of a major real estate company selling residential apartments in the United Arab Emirates. Discuss at least three applications of   his knowledge of price elasticity of demand that can influence the profitability of his brand.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART 4( CLO4)

Question1                                                                                                                        5marks

1. a) The table below shows the production schedule of a jeans manufacturing unit. Calculate the marginal product of labor and discuss whether it follows the law of diminishing marginal product. Explain why diminishing relationship exist. Draw a graph showing the relationship between the total output and marginal output.

Number of workers	Output(’000 numbers per week)	Marginal product
0	0
1	100
2	150
3	175
4	190
5	200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question 2                                                                                                                      5 marks                    

1. a) Use the data in the table and calculate the average costs and the marginal cost (2 marks)

Output(units)	Total cost	AFC	AVC	ATC	MC
0	$400
10	540
20	620
30	810
40	910

 

1. b) Discuss the relationship between ATC and MC. Also draw a graph showing both curves.(3 marks)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART 5 ( CLO5)

Question1                                                                                                                        5marks

1. a) Zena produces fresh flowers. She faces a perfectly competitive market. The table below presents her cost schedule. Complete the table by calculating marginal cost (MC).(1 mark)

Output(boxes)	Total Cost(TC)	Marginal cost(MC=∆TC/∆Q)
0	$100
10	190
20	250
30	360
40	490
50	640

 

1. b) If the market price of a box of fresh flower is $13, how much output will the firm produce to maximize the profit. Calculate her profit at that level of output. Show your work (2 marks)

 

 

 

 

1. c) Draw and discuss the major differences between the demand curve faced by a firm in perfectly competitive market and a firm in monopoly market.(2 mark)

 

 

 

 

 

 

 

 

Question 2                                                                                                                    5 marks

The following graph belongs to a hypothetical monopoly firm. Use the data to answer the questions given below.

 

1. a) Identify the profit maximizing quantity and price for this firm.(2 marks)

 

 

 

1. b) Discuss at least three ways in which this firm will try to keep its monopoly power. (3 marks)