Economics of Enterprise Answers

1. Draw all the graphs related to Perfect Competitive market and Monopoly.

2. Differentiate between the above mentioned markets.

List the five keys determinant of price elasticity of demand and explain how 

each determinant indicates whether demand tends to be elastic or inelastic

QDA = 8000 - 1000Px, QSA= - 4000+2000Px

i) Find out the market clearing price and quantity.

ii) Plot, on one set of axes, the market demand curve and the market supply curve

for commodity A and show the equilibrium point.

iii) Is the equilibrium stable? Explain.

Following are the demand and supply function of a market

QDA = 8000 - 1000Px, QSA= - 4000+2000Px

i) Find out the market clearing price and quantity.

ii) Plot, on one set of axes, the market demand curve and the market supply curve for commodity A and show the equilibrium point.

iii) Is the equilibrium stable? Explain.

Assume we have three state economy and two assets :

P(0) = [110.2472 111.7749] 108.5714 131.9048 P(1) = 117.3077 105.7692 119.4175 105.8252

Can you find a set of pseudo-probability consistent with this economy?

Assume we have three state economy and two assets :

P(0) = [110.2472 111.7749] 108.5714 131.9048 P(1) = 117.3077 105.7692 119.4175 105.8252

Can you find a set of pseudo-probability consistent with this economy. Is this set unique ? Explain

Consider a monopolistic competitor who has the following demand function p=140-4Q.In additionsuppose that his total cost function is given Tc=10+5Q² . Find his equilibrium price and quantity

Lomar Corp. produces two types of generators – diesel and gas turbine. The revenue and cost functions are given as follows: 𝑅(𝑥,𝑦)=2𝑥+3𝑦 𝐶(𝑥,𝑦)=𝑥2−2𝑥𝑦+2𝑦2+6𝑥−9𝑦+5

where x is the quantity of diesel generators and y is the quantity of gas turbine generators. Both revenue and cost are measured in millions of ringgits.

(a) Determine the profit-maximising output level. How many of each type of generators should Lomar Corp. produce to maximise profit?

(10 marks)

(b) Determine the total profit generated by the optimal output level as in (a) above. What is the maximum profit?

(2 marks)

(c) Determine whether Lomar Corp. is operating in the short run or long run. Explain.

(3 marks)

Compare how resources are allocated in market and mixed economic system

consider the following open economy. the real exchange rate is fixed and equal to 1. consumption is given by C=50+0.5(Y-T), investment is I =20, taxes are t=10, and the government budget is balanced. imports and exports are given by I M = 0.2Y and X = 0.02Y* where Y* is foreign GDP.