NAME: RAMEEZ AHMED

ID: 54471
SUBJECT: MICRO ECNOMICS
TEACHER: YASSIN TURABI

ANSWER NO 1:

1. A   Total output: Origin Qt

2. B   Output sold in Pakistan: Origin Qp
3. C   New price in Pakistan: Pp (no change)
4. D   Total sold in the India: Origin Qt minus OQp = QpQt
5. E   Total profits: Blue shaded line + red shaded line
6. F   Total profits on Indian. Sales: red shaded line
7. G   Total profits on Pakistan Sales: Blue shaded line

ANSWER NO 2:

Part a:
a 15 units
b 13 dollar
c 13*15= 195 dollar
d 15*15= 225 dollar
e 195-225= 30 dollar
Part b:
In long term some firm doped out from industry due to the loss the economic profit is equal to 0.

ANSWER NO 3:
PART A:
This market is in monopolistic competition.
This can be justified from the following features -
In the market, there are several vendors (players).
There is no charge for a license, and vendors are welcome to attend (free entry and exit of firms
in the market)
Different vendors sell different types of street food (differentiated products).
They are making profit in the short run.
PART B:
In this business the vendors will earn profit in the short run. For e.g., In tipu’s case -
revenue = Rs. 5000/day (50 meals sold * 100 Rs)
cost = Rs 3600
can be calculated as - Cost of 3 workers taking 200/hr for 2 hours (1200 Rs) + cost of a worker
charging 100/hr for 2 hrs. (200 Rs) + cost of ingredients used for 50 meals (Rs 2000) + cost of
cart/day (Rs 1000/5 = Rs 200/day)
So the profit is Rs 1400/day or 42000/month.
However, in the long run the firms will earn zero economic profit because of free exit and entry
of firms which will cause vendors to lower their prices eventually leading then to break even
stage.

ANSWER NO 4:
PART A:
Price per Quantity (in Total
box Boxes) Revenue
12 0 o
11 5 55
10 10 100
9 15 135
8 20 160
7 25 175
6 30 180
5 35 175
4 40 160
3 45 135
2 50 100
1 55 55
PART B:
 If it is perfectively competitive market, players of the market keep producing goods until price
of the product is equal to Marginal Cost of product. Here marginal cost of producing apple is $1.
Price will be $1, if each firm will reduce 55 apples. Hence both firms will produce 55 apples
each at price $1.
PART C:
After forming cartel both firms will form monopolist market instead of duopolistic and they will
try to maximize profit. Maximum profit is possible at sell 30 units at $6 which is equal to $180.