Uploaded on

 

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
No Downloads

Views

Total Views
2,672
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
0
Comments
0
Likes
6

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide
  • Market Structure Past Paper Questions

Transcript

  • 1. Chapter #7 EDWARD BAHAW - Economic Principles and Their Application to Business (ABE) Market Structure: Perfect Competition and Monopoly
  • 2. Market Structure EDWARD BAHAW - Economic Principles and Their Application to Business (ABE) Type of Competition Number of Sellers Barriers to Entry and Exit Profit Nature of Product Pricing Perfect Competition Infinite number No Normal Homogenous Price Taker Monopolistic Competition Many No Normal Non - Homogenous Price Setter Oligopoly Few Yes Abnormal Non - Homogenous Price Setter Monopoly One Yes Abnormal No close substitute Price Setter
  • 3. Barriers to Entry
    • Government approvals.
    • Patent/Copyrights
    • Professional qualifications/membership.
    • Large Capital requirements.
    • Lack of Raw materials.
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 4. Average Revenue & Marginal Revenue EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 5. EDWARD BAHAW - Economic Principles and Their Application to Business (ABE) Price setter: Monopoly Price Quantity TR AR MR 30 5 150 30 25 15 375 25 22.5 20 25 500 20 12.5 15 35 525 15 2.5 10 45 450 10 -7.5 5 55 275 Price taker: Perfect Competition Price Quantity TR AR MR 20 4 80 20 20 15 300 20 20 20 25 500 20 20 20 35 700 20 20 20 45 900 20 20 20 55 1100
  • 6. Average and Marginal Revenue Q $ AR MR P Q $20 O Perfect Competition Monopoly AR = MR EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 7. Cost Curves Quantity MC AC Q O O Cost ($) EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 8. Perfect Competition Q MC AC MR E Q O MR =MC O P P Cost/Price ($) AR = EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 9. Monopoly Q MC AC AR MR Q E E Q O MR =MC O P Cost/Price ($) AC EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 10. Normal and Abnormal Profit
    • Normal profit : AR = AC where profit is maximized
    • Abnormal profit : AR > AC where profit is maximized
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 11. June 2007 Question 3
    • Q3) A firm has the following cost structure:
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 12. June 2007 Question 3
    • (a) Define and calculate the following for the firm:
    • (i) Fixed cost; (2 marks)
    • (ii) Average total cost schedule; (5 marks)
    • (iii) Marginal cost schedule. (5 marks)
    • (b) If the industry price is fixed at £120, calculate the firm’s:
    • (i) Profit-maximising level of output; (5 marks)
    • (ii) Maximum achievable profit. (3 marks)
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 13. Dec 2007 Question 5
    • Q5 (a) Explain the key characteristics of a monopoly industry. (5 marks)
    • (b) Using an appropriate diagram, outline the model of monopoly. (5 marks)
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 14. June 2008
    • Q5 The following diagram illustrates a market with demand curve D under a situation of monopoly. Note that marginal cost ( MC) is constant and equal to average cost (AC).
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 15. June 2008
    • (a) Carefully draw the above diagram in your answer book and draw or indicate on the
    • diagram each of the following:
    • (i) the marginal revenue curve;
    • (ii) the profit-maximising monopoly price;
    • (iii) the profit-maximising monopoly output;
    • (iv) the profit-maximising level of monopoly profit;
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 16. Dec 2008 Question 5
    • (a) Explain, using appropriate formulae, the terms ‘marginal revenue’ and ‘marginal cost’. (5 marks)
    • (b) The following table gives data on marginal revenue and marginal cost for a company in perfect competition.
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 17. Dec 2008 Question 5
    • Plot the company’s marginal revenue and marginal cost schedules carefully on a graph. (Use the graph paper provided in your answer book.) (5 marks)
    • (ii) Identify the point or points at which the company maximizes profit. Give reasons. (10 marks)
    • (iii) Explain how your answer to part (ii) would be affected by a fall in the market price from 100 to 60. (5 marks)
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 18. June 2009
    • Q4 (a) Using an appropriate diagram, outline and explain the equilibrium conditions of a perfectly competitive firm in long-run equilibrium. (10 marks)
    • (b) Suppose all the firms in the perfectly competitive industry are making an excess profit:
    • (i) Draw both firm and industry diagrams to illustrate this situation.
    • (ii) Explain, using both your diagrams in (i), how the industry moves to its long-run equilibrium. (15 marks)
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)
  • 19. June 2010 Question 5
    • (a) Draw a demand curve of a firm operating in a Perfectly Competitive market and explain the shape of the curve. (5 marks)
    • (b) Examine, using clearly labelled diagrams, the process by which a firm in a Perfectly Competitive market moves from a short-run equilibrium to a long-run equilibrium. (10 marks)
    EDWARD BAHAW - Economic Principles and Their Application to Business (ABE)