Question 1 Part A Price 10 20 30 40 50 60 70 Quantity demand 150 130 110 90 70 50 30 Quantity supply 30 50 70 90 110 130 150

i)
80 70 60 50 70 60 50

Price

40 30 20 10 0 30 50 70

40 30 20 10

Supply Demand

90

110

130

150

Quantity _ Equilibrium is the point of balance between demand and supply in the market. And it is the point where the price is $40 and supplied quantity is 90 and demanded quantity is 90. ii) At any price above the equilibrium, say $50, there is an excess quantity supplied (surplus) of 40 in quantity. For any price below equilibrium - $30 for example the horizontal distance between the curves tells us there is an excess quantity demand (shortage) of 40 in quantity. iii)

When there is an additional 20 units of demand at each level of price, the supply curve S remains unchanged and that the demand will shift upward to the right and increase from D1 to D2. This will lead to the change of equilibrium. The increase in demand causes both the equilibrium price and equilibrium quantity to increase. And it would be 110 quantity of equilibrium and $50 price of equilibrium. iv) deadweight lost at the price of $70 there would be a surplus and shortage of units on the market and the process of market adjustment in the future will be

PART B Demand = $4,000,000 - $150,000*Q Supply = $3,000,000 + $100,000*Q i) Quantity 1 2 3 4 5 6 7 Demand 3,985,000 3,700,000 3,550,000 3,400,000 3,250,000 3,100,000 2,950,000 Supply 3,100,000 3,200,000 3,300,000 3,400,000 3,500,000 3,600,000 3,700,000

We have equilibrium when the number of demand is equal to supply, which is $3,400,000 for sale and the market price is

ii) The more elastic at the equilibrium level will be iii) we have 2 warehouse are available, it means we have quantity is 2, then to increase the price over the equilibrium to PART C i) The market for houses as income increases

ii)

The market for computers as production costs fall

iii)

The market for tea when there is a global shortage of coffee beans

iv)

The market for public transport as the price of fuel increases

v)

The market for Australian dollars as exports increase

Question 2 i) Price 165 150 135 120 105 90 75 60 45 30 15 0 Quantity Demanded 0 40 80 120 160 200 240 280 320 360 400 440 Total Revenue Elasticity coefficient Demand Elascity

ii) In this case we should raise the price from $30 to $45/

iii) To maximize revenue the company should put the level of production at

Part B
Units Fixed cost Variable cost Total cost Marginal cost Avergage total cost Average variable cost Average fixed cost Revenue if price = $100/unit Profit if price = $100

0 1 2 3 4 5 6 7 8 9 10 11 12

100 100 100 100 100 100 100 100 100 100 100 100 100

0 10 30 60 100 150 210 280 360

100 110 130 160 200 250 310 380 460 90 120

710 870

810 970

Part C i)
Fixed cost Variable cost Total cost Marginal cost Price per Unit Marginal Revenue Profit

0 1 2 3 4 5 6 7 8 9 10 11 12

110 30 60 100 210 280 360 90 120 810 870 200 250

190 180 170 160 150 140 130 120 110 100 90 80

ii)

iii)

iv)

Question 3 Part A explain monopoly and monopolistic competition market structures, and identify the key factors that distinguish them Monopoly The market structure of monopoly is categorized by a single seller, a unique product and extremely difficult or impossible entry into the market. Unlike the product of a perfectly competitive firm, there are no close substitutes for the monopolists product. Monopoly, like the perfect competition, corresponds only approximately to real-world industries, but, as is the case with perfect competition, it serves as a useful benchmark model. And under is the broad look of these characters. Single seller Monopolistic Economists define monopolistic competition as a market structure which are characterised by many small sellers, a differentiated product and easy market entry and exit. Monopolistic competition fits numerous real world industries. In fact, most of the businesses you deal with on a day-to-day basis are all monopolistic competitors.

Part B choose two different industries from your home country representing monopoly and monopolistic competition market structures. Identify their key characteristics in relation to the factors used to differentiate between the market structures. Using the real data from your case studies analyse how well each case study fits with the different market structures.

Part C for the monopoly firm in your case study, identify the potential market power that it has and the types of controls (if any) that are in place to limit this.

Part D For the monopoly firm in your case study, identify if there are other benefits generated by the monopoly that would be difficult to gain from a monopolistic competition market structure.

Part E for the monopolistic competition industry, identify the extent to which firms are able to differentiate their products, and whether this allows them to gain some price advantages.