# Eco Assistance

Topics: Costs, Inflation, Supply and demand Pages: 8 (1878 words) Published: May 22, 2011
Economic

Question 1:
(a) Complete the following table of costs for a firm. (Note: enter the figures in the MC column between outputs of 0 and 1, 1 and 2, 2 and 3, etc.) Output (units)| TC(＄)| AC(＄)| MC(＄)|
0| 55| ----| 30|
1| 85| 85| |
| | | 25|
2| 110| 55| |
| | | 20|
3| 130| 43| |
| | | 30|
4| 160| 40| |
| | | 50|
5| 210| 42| |
| | | 70|
6| 280| 47| |
| | | 90|
7| 370| 53| |
| | | 110|
8| 480| 60| |
| | | 130|
9| 610| 68| |
| | | 150|
10| 760| 76| |
(b) How much is total fixed cost at:
(1) an output of 0 units?

The “0 units” total fixed cost is 55.

(2) an output of 6 units?

The “6 units” total fixed cost also is 55.

(c) How much is average fixed cost at:
(1) an output of 5 units?

The “5 units” total fixed cost is 55.
So the “5 units” average fixed cost is 11.

(2) an output of 10 units?

The “10 units” total fixed cost is 55.
So the “10 units” average fixed cost is 5.5.

(d) How much is total variable cost at an output of 5 units?

The “5 units” total fixed cost is 55. And the “5 units” total cost is 210. So the “5 units” total variable cost is 155.

(e) How much is average variable cost at an output of 10 units?

The “10 units” total fixed cost is 55. And the “10 units” total cost is 760. Then the “10 units” total variable cost is 705. So the “10 units” average variable cost is 70.5.

Question 2
Suppose the jeans industry is an oligopoly in which each firm sells its own distinctive brand of jeans, and each firm believes its rivals will not follow its price increases but will follow its price cuts. Draw and explain the demand curve facing each firm, and given this demand curve, dose this mean that firms in the jeans do or do not compete against one another?

Demand curve

Explanation
The oligopoly is a market structure characterized by fewer sellers, either a homogeneous or a differentiated product and barriers to market entry. The oligopoly is a big business market structure. The jeans do compete against one another. In market competition conditions, the formation of product market price depends on supply and demand. The image (a), when the price at the p1, the quantity of supply at qs1, the quantity of demand at the qd1, when the time, the demand greater than supply. When the price at p2, he quantity of supply at qs2, the quantity of demand at the qd2, when the time, the supply greater than demand. The image (b), when the price increase, the quantity of demand will decrease. When the price increase, the quantity of demand will increase. But the just is a oligopoly market, the oligopoly using form of non price competition, costly marketing campaigns and image-building exercises. If the price decrease, the firm will cut profit. So the firm do not need cut price.

Question 3
(a) Suppose the income elastic of demand for pre-recorded music compact disks is +4 and the income elasticity of demand for a cabinet marker’s work is +0.4. Compare the impact on pre-recorded music compact disks and the cabinet marker’s work of a recession that reduces consumer incomes by 10 per cent.

The income elasticity of demand is the ratio of the percentage change in the quantity demanded of a good of service to the percentage change in income that brought about this change in quantity demanded. The income elasticity of demand is positive, the product is normal good or service, the pre-recorded music compact disks is +4, it is positive, so it is normal good. And the cabinet marker’s work is +0.4, it is also positive and normal good. A normal good is any good or service for which there is a direct relationship between changes in income and its demand. If the income decreases, the normal good demand will decrease. So when the recession, the pre-recorded music compact...