BS1107 Introduction to Microeconomics-City, University of London

Instructions to students: All questions are compulsory

Materials:

Dictionaries are not permitted.

Calculators are not permitted.

TASK : BS1107 Introduction to Microeconomics Assignment

Question 1

Provide a diagram that identifies the profit-maximizing solution for a monopolist (optimal price and optimal quantity) and includes consumer demand, marginal revenue, and the marginal cost of production of the firm.(8 marks)
Explain why this solution maximizes the monopolist’s profits. Build the logic of your argument based on the marginal revenue and marginal cost of the firm.(6 marks)
Provide a real-world example of a firm enjoying a natural monopoly position and explain why this firm can sustain monopoly power (i.e., why it has no effective competitors)(6 marks)(Total 20 marks)

Question 2

Provide a diagram that identifies the long-run supply curve of a firm operating under perfect competition and includes marginal cost and long-run average total cost. Identify on the diagram the price range over which the firm is active in the market and the price range over which the firm chooses to exit.(8 marks)
Explain the firm’s decision to participate in the market or exit. Build the logic of your argument based on the market price and the long-run average total cost of the firm.(6 marks)
Provide a real-world example of a firm operating under perfect competition that trades internationally (across borders), and explain what market factors erode the profitability of this firm.(6 marks)(Total 20 marks)

Consider the market for a product or service that generates a negative externality on society (e.g., pollution).Provide a diagram that identifies the market equilibrium, the social cost generated, and the excess quantity transacted in the market in the absence of policy intervention.(8 marks)
Identify public policy initiatives that could be adopted to ensure that buyers and sellers internalize this externality. Explain why these policies would be effective.(6 marks)
Provide a real-world example of a product or service that generates a negative externality that is not pollution, and identify public policies that have been adopted to limit its negative impact.(6 marks)(Total 20 marks)