Business Economics

1. “In the monopolistic competition, a few firms sell differentiated products” Explain this
statement by highlighting important features of this kind of a market. Substantiate your answer
by a live example. Also explain how the equilibrium in this kind of a market is different from a
long run equilibrium under perfect competition.
Answer:

2. Complete the hypothetical table below and explain in brief, the behaviour of each type of cost.

Total Total Average Average Average

Fixed Variable Total Fixed Variable Total Marginal
Quantity Cost Cost Cost Cost Cost Cost Cost
0 0
1 25
2 40
3 50
4 60
5 100 80
6 110
7 150
8 300
9 500
10 900

3. a) What are the practical uses of the concept of price elasticity of demand for different
stakeholders in the production process?

b) Distinguish between the shift and movement in the demand curve. Explain any five factors
which would bring about a shift in the demand curve for Maggie noodles.