Reference no: EM132105560

Part -1:

Use the law of supply caused by firms experiencing increasing marginal cost in the short run to explain why all producers must receive a surplus whenever they produce and sell more than one unit of a product but may receive no surplus if only one unit is sold. Make up a numerical example to illustrate.

Provide two reasons why producer surplus must increase when the price of a product rises.

Explain why the slope of the production function falls as more workers are hired, that is, total product increases at a decreasing rate, while the slope of the total cost curve rises as more output is produced, that is, TC increases at an increasing rate.

Explain fully why the short-run ATC curve is U-shaped, that is, falls then increases as more output is produced in the short run.

Why is the long-run ATC also U-shaped? Explain fully.

Part -2:

After you finish Module 6, complete this assignment and submit it to your Open Learning Faculty Member for marking.

Explain why both monopolies and perfectly competitive firms produce the output where MR = MC. Since MR = MC for both monopolies and perfectly competitive firms, why is the profit-maximizing price based on MR = MC higher than MC for the monopoly but equal to MC for perfect competition?

Under what conditions will monopolies and perfectly competitive firms make losses, even when they are producing the profit-maximizing output? Under what conditions will they both stay in business and continue to produce in the short run, even with making losses?

Explain fully why monopolies lead to a "deadweight" loss but perfect competition does not, even though both maximize profits by producing the output where MR = MC. Under what conditions will the monopoly price be lower than the perfectly competitive price, assuming that both are maximizing profits?

The existence of excess capacity in monopolistic competition means that there are too many firms. Does this increase in the number of firms increase or reduce the price which consumers pay? Why or why not?

Part -3:

After you finish Module 7, complete this assignment and submit it to your Open Learning Faculty Member for marking.

Explain two important differences between the labour market and the product market.

Explain why the value of the marginal-product curve for labour is also the demand-for-labour curve in a perfectly competitive labour market.

Explain two factors which shift the demand for labour and two factors which shift the supply of labour.

Provide four reasons why some workers receive higher wages than other workers.