QUESTION 2 Consider a firm in a perfectly competitive industry with an average cost function AC = 92 - 99 + 20 Where q i

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Question 2 Consider A Firm In A Perfectly Competitive Industry With An Average Cost Function Ac 92 99 20 Where Q I 1 (72 KiB) Viewed 29 times

QUESTION 2 Consider a firm in a perfectly competitive industry with an average cost function AC = 92 - 99 + 20 Where q is the individual firm's output. ai) What is the long run market equilibrium price? (4 marks) If the market demand curve is given by Q = 112.539 - 4p. aii) Find the equilibrium level of market output, Q*, and the number of firms in the industry, N. (3 marks) bi) A monopolist faces the demand curve Q = 200 - 4P, where Q denotes output and P the price. Find the equation for the marginal revenue curve. (3 marks) bii) Assume that there are no fixed costs and the marginal cost of production is constant at £10 per unit, calculate the equilibrium output and the profit made by the monopolist. Illustrate your answer on a diagram. (2 marks) NEXT PAGE biii) Calculate the level of consumer surplus in this market. (1 mark) c) The government removes all barriers to entry to this market making it perfectly competitive. What is the market equilibrium price, output and the level of consumer surplus? (3 marks) d) True or False? A monopolist produces on the inelastic part of its demand curve. Explain. (6 marks) e) Explain what is meant by a monopolist practicing limit pricing. (3 Marks) (Total 25 marks)