GONZAGA JESUIT COLLEGE
No. 1 Obijackson Boulevard, Okija, Anambra
ECONOMICS
SS2 ASSIGNMENT (20 MARKS)
1.
(N)
Fig. 1: Profit-Maximizing Equilibrium of a Firm under Perfect Competition.
Use the diagram above to solve the following questions.
a) At what output levels does the firm experience:
i. Normal Profit
ii. Subnormal Profit/Loss
iii. Positive Profit
b) Explain your answer in (a) (i, ii, and iii)
c) What is the minimum price the firm will charge in the
i. Short-run
ii. Long-run
d) Justify your answers each in (c) (i and ii)
e) Calculate the value of profit at the equilibrium where AR is greater than AC.
f) What is the total variable cost at output 200?
2. The table below shows the production and price schedule for a firm operating in a perfectly
competitive market. Questions:
Table 1: Perfect competitive firm a) Calculate the Total Revenue (TR), Marginal
Quantity Price Total Cost Revenue (MR), and Marginal Cost (MC) for
(Units) (N) (N) each level of output.
b) Using a graph sheet, plot the Average Revenue
0 20 10
(AR), Marginal Revenue (MR), and Marginal
1 20 25 Cost (MC) curves on the same axes.
2 20 35 Note: Your graph must be well labelled.
3 20 40 c) From your graph, determine the profit-
4 20 50 maximizing output level.
d) State the two conditions necessary for a firm to
5 20 65
be in equilibrium.
6 20 85