Question 1.

12 points

QUESTIONS TO PONDER

1. what market structure(s) would this graphical illustration presents? 

- Monopoly and Monopolistic Competition

2. How much is the Total cost incurred in producing the maximum output? 

- TC = ATC x Qm = 10, 000

3. How much is the Total Revenue this firm earned in producing the maximum output?

- TR = Pm x Qm = 12, 000

4. How much is the Total Profit this firm could gain in producing the maximum output?

- Profit = (Pm–ATC)Qm = 2, 000

5. the point of deadweight loss? 

- ∆ABC

6. The output that must be produced to be at socially optimal position.

- D = MC = 280 units
Question 2. 10 points

QUESTIONS TO PONDER

1. What market situation does the illustration illustrates?

- Monopolistic Competition

2. With your answer in #1, is it applicable to produce at output 500units? 

- Yes

3. looking at the graphical illustration how much is the AVC? how much is the Price?

- AVC = Php50

- P = Php46

4.  How much would be the total loss of this firm if it continues to produce beyond its ability? 

- Total Loss = (Pmc – ATC)Q = Php 5, 000

5. If you will be a business entrepreneur having this kind of data, what would be your
decision? 

- Shutdown

6. Does the illustration applicable to a monopsony? why (1 sentence only)? 

- No because it doesn’t reflect the buyers’ marginal value and marginal expenditure.
Question 3. 10 points

                                    

   

                              P1 = 30                                Q1= 220

                              P2 = 10                                Q2 = 360

                              P = 25                                  Q3 = 540

QUESTIONS TO PONDER

 1. What kind of Model is this illustration and under what market structure? 

- Kinked Demand Curve Model and under Oligopoly market structure.

 2. At what point will these firms decide not to make alterations when it comes to     
producing or changing prices? 

 3. What elasticity of demand will other firms under this structure will have to         

     follow the price changes? 

 4. At what point/output will these firm decide to produce to be considered at the       point of
socially optimal situation? 

- D = MC = 450 units

 5. How much is the price where no firm will intend to follow?

- P = 10

 6. what does the gap between the two MR indicates? (2 sentences only)

- The upper section of the kinked-demand curve has a higher price elasticity than the lower
part. Due to the kink in the demand curve, MR curve is discontinuous at the level of output
corresponding to the kink.
Question 4. 13 points

1. This Incorporation is under monopolistic competitive market, what do you think is the
situation of this industry? (1pt)

- The situation of this industry is incurring an economic loss.

2. will this incorporation continue to produce if it is operating in the long run? why? (3pts)

- Yes, as long as incorporation earning an economic profit (P=ATC) entry increases the number
of products from which customers can choose.

3. we assume this figure shows that Stylers is operating in the short-run, How much is the
profit this Inc. could earn? (2pts) 

- Profit = (Pm–ATC)Qm = 0

4. If this Inc. will produce at an amount of 480M units, does it both satisfy consumers and the
company? Why? (4pts) 

5. What approach will you use to determine the price and the output? what then are the output
and price this Inc. will impose? (3pts)

- MR = MC will be used to determine the price and output.

- Q = 420 and P = 50