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I understand that disciplinary action (which may include deduction of marks in the TMA) will be taken against me if I am found to be an offender of TMA plagiarism.

Signed: Irene Jong Ai Lin 940629135536 Date: 17.10.2017
Tutor Marked Assignment (TMA)
Semester/Year 2/2017
Student’s Name Irene Jong Ai Lin
Student’s ID No: 082160119
Course Code BBM102/05
Course Title Microeconomics
Class Code 82MIC1
TMA No: 2
No. of pages of this TMA (including this page) 8
Tutor DZULKARNAIN BIN ABD AZIZ
Course Coordinator PRAKASH A/L V ARUMUGAM
T-DF TMA declaration Form (version
Part A
Question 1
Output (units) Price (RM) Total Cost (RM) Total Revenue (RM) Marginal Cost (RM) Marginal Revenue (RM)
0 20 30 0×20=0 – –
1 20 50 1×20=20 (50-30)÷(1-0)=20 (20-0)÷(1-0)=20
2 20 60 2×20=40 (60-50)÷(2-1)=10 (40-20)÷(2-1)=20
3 20 80 3×20=60 (80-60)÷(3-2)=20 (60-40)÷(3-2)=20
4 20 110 4×20=80 (110-80)÷(4-3)=30 (80-60)÷(4-3)=20
5 20 150 5×20=100 (150-110)÷(5-4)=40 (100-80)÷(5-4)=20
6 20 200 6×20=120 (200-150)÷(6-5)=50 (120-100)÷(6-5)=20
Formula:
Total Revenue (RM) : Price × Output
Marginal Cost (RM) : ?Total Cost ÷ ?Output
Marginal Revenue (RM) : ?Total Revenue ÷ ?Output
Price = RM 20,
Output = 3 units
Profit = Total Revenue –Total Cost= (RM20×3units) ? RM80 = RM20 (loss)
The firm in the short run. At output 0 unit, total cost exist indicating fixed cost. The short run in this microeconomic context is a plaining period over which the managers of a firm must consider one or more of their factors production as fixed in quantity (Arumugam 2013).
The type of structure does this firm belong to prefect competitive market, because the price equals marginal revenue. Prefect competitive market is a model of the market based on the assumption that a large number of firms produce identical goods consumed by a large number of buyers. Marginal revenue equals the marker price. The price is not affected by the output choice of a single firm, the marginal revenue the firm gains by producing one more unit is always the market price.
Part A
Question 2
Output (units) Price (RM) Total Cost (RM) Total Revenue (RM) Marginal Cost (RM) Marginal Revenue (RM)
0 18 2 0×18=0 – –
1 16 14 1×16=16 (14-2)÷(1-0)=12 (16-0)÷(1-0)=16
2 14 24 2×14=28 (24-14)÷(2-1)=10 (28-16)÷(2-1)=12
3 12 32 3×12=36 (32-24)÷(3-2)=8 (36-28)÷(3-2)=8
4 10 38 4×10=40 (38-32)÷(4-3)=6 (40-36)÷(4-3)=4
5 8 42 5×8=40 (42-38)÷(5-4)=4 (40-40)÷(5-4)=0
6 6 48 6×6=36 (48-42)÷(6-5)=6 (36-40)÷(6-5)=-4
Formula:
Total Revenue (RM) : Price × Output
Marginal Cost (RM) : ?Total Cost ÷ ?Output
Marginal Revenue (RM) : ?Total Revenue ÷ ?Output
Price=RM12
Output=3units
Profit = Total Revenue –Total Cost= (RM12×3units) ? RM32 = RM4
The firm in the short run. At output 0 unit, total cost exist indicating fixed cost. The short run in this microeconomic context is a plaining period over which the managers of a firm must consider one or more of their factors production as fixed in quantity (Arumugam 2013).
The type of structure does this firm belong to monopoly firm, because a high output, would reduce price and a lower output level would increase price. Monopoly firm is a the opposite of the spectrum of market models from perfect competitive. A monopoly firm has no rivals. It is the only firm in its industry. Monopoly firm have the market itself, but it also need not worry about other firms entering. A high output, would reduce price and a lower output level would increase price.

Part B
Question 1
There are five types of cots of a firm in the short run is fixed cost, variable cost, average fixed cost, average variable costs and marginal cost. Fixed cost is the costs do not change with the change in the level of output. The fixed cost is the sum of the ‘short run explicit fixed cost and implicit costs incurred by the entrepreneur. For example, rent, interest and salaries. Variable cost is refers to cots that change with the change in the level of production. The amount of total variable cost is spent for each of the variable inputs used. For example, costs incurred on purchasing raw material, hiring labor, and using electricity. Average fixed costs refers to the per unit fixed cost of production. The calculation of average fixed costs is total fixed cost of production dividend by the quantity of output produced. Average Variable Costs refers to the per unit variable cost of production. The calculation of average variable cost is variable cost divided by the quantity of output produced. Marginal Cost refers to the addition to the total cost for producing an additional unit of the product. Marginal cost curve is also a U-shaped curve as marginal cost initially decreases as output increase and afterward, rises as output increases. This is because total cost increases at decreasing rate and then increase at increasing rate.

The main differences between short run and long run. In short run is a period of time in which the quantity of at least one input is fixed and the quantities of the other inputs can be varied. The long run is a period of time in which the quantities of all inputs can be varied. There is no fixed time that can be marked on the calendar to separate the short run from the long run. The short run and long run distinction varies from one industry to another. A short run can be period of time ranging from a couple of weeks to month or even a year. On the other hand, a long run can also span over the same period of time depending on the company and the set parameters. In the long run the general price level, contractual wages, and expectations adjust fully to the state of the economy. In the short run these variables do not always adjust due to the condensed time period. Short run costs are accumulated in real time throughout the production process. Long run costs are accumulated when firms change production levels over time in response to expected economic profits or losses.
Differentiate between economies of scale and diseconomies of scale. Economies of scale are the principle that per unit cost of producing a good is lower when one produces that good in greater quantity. A firm will achieve economies of scale when the total cost per unit reduces as more units are produced. This is because even though the variable cost increase with each unit produced, the fixed cost per unit will reduce as the fixed costs are now divided among a larger number of total products.
Diseconomies of scale are the exact opposite outcome that being a higher cost per unit when fewer of a good are produced. Diseconomies of scale can result from a number of inefficiencies that can diminish the benefits earned from economies of scale. A firm constantly aims to obtain economies of scale, and must find the production level at which economics of scale turns to diseconomies of scale.

.

Part B
Question 2
Monopolistic frim is a type of imperfect competition such that many producers sell products that are differentiated from one another. The three main characteristics of a monopolistic firm are that there are high number of frim, products differentiation and relatively easy entry. The monopolistic is a high number of firm providing the related good or service but not homogeneous products. There have many competitors, but each one sells a slightly different product. Each monopolistic firm acts independently and has a limited share of the market. All the individual frim has limited control over the market price. Monopolistic firm markets have highly product differentiation. Product Differentiation is the process of distinguishing a product or service from others to make it more attractive to a target market. There are product differentiation occurs it is because perceive a difference between products. The perceived differences between the product of one firm and that of its rivals so that some customers value it more. There are three type of production differentiation is simple, horizontal and vertical. The monopolistic firm can freely entry and exists in the long run. It ensures that there are neither supernormal profits nor any supernormal losses to firm in the long run.

Monopolistic firm achieves equilibrium in the short run.
839470-31750018002258096250011811003048000025717557150Price, Cost
00Price, Cost
457200695325P1
00P1
4476751066800C1
00C1
16478251981200Q1
00Q1
19907251562100MR
00MR
25527001371600AR
00AR
1733550135255000
1492252057400041529039433500 248920-323215MC
00MC
-27940401955AC
00AC
82486538227000839470392430 48323524701500 83629513398500 838835-21463000 67246597790Output
00Output
The demand curve in a monopolistic firm downward slopping, because as price decrease, the quantity demanded for that good increase. The demand curve has several important implications for monopolistic firms in this market. The downward slope of a monopolistically firms demand curve signifies that the firms in this industry have market power. The market power allows firms increase their prices without losing all of their customers. In monopolistic firms have a limited ability to dictate the price of all the products. The sources of the market power is that there are comparatively fewer competitors than in competitive market, so businesses focus on product differentiation or difference unrelated to price. A business that works on its branding can increase its prices without risking its consumer base. The downward slope of the demand curve contributes to the inefficiency of the market. Monopolistically competitive firms maximize their profit when they produce at level where its marginal cost equals its marginal revenues. The demand curve of a monopolistic firm downward slopping, reflecting market power, the price these firms will charge will exceed their marginal costs. The market leading to a loss in consumer surplus, deadweight loss, and excess production capacity.

Reference:
Arumugam, Prakash, V. . 2013. Microeconomics. Firm Organization, Production and Cost. Penang: Wawasan Open University.

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