The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.Assignments submitted through email will not be accepted.Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.Students must mention question number clearly in their answer.Late submission will NOT be accepted.Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).Submissions without this cover page will NOT be accepted.College of Administrative and Financial Sciences
Problem Solving 2
Deadline: 04/04/2020 @ 23:59
Course Name: MICROECONOMICS
Student’s Name:
Course Code: ECON101
Student’s ID Number:
Semester: 2
CRN:
Academic Year: 1440/1441 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade: Marks Obtained/Out of
Level of Marks: High/Middle/Low
INSTRUCTIONS – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via
allocated folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism).
• Submissions without this cover page will NOT be accepted.
Question 1 (10 Marks)
The following graph represents the situation of Sindbad’s caps, a firm selling caps in the perfectly
competitive caps industry.
1) How much output should Sindbad produce to maximize his profit, if the market price is equal
to $11? (2 marks)
2) How much profit (loss) will he earn? (2 marks)
3) Indicate the profit (loss) area on the graph. (2 marks)
4) Find the fixed cost paid by the firm. (2 marks)
5) Suppose Sindbad decides to shut down. What would his loss be? (2 marks)
Question 2 (20 Marks)
The figure below shows the demand and cost curves for a monopolist. Assume there are no fixed
costs in the market and an unlimited number of units of the product can be produced at a marginal
cost of $5 per unit. As a result average total cost and marginal cost are the same.
Price
$7
$5
a
b
e
c
d
f
ATC = MC = 5
Demand
18
30
Quantity
MR
1) Find the output level and the price charged to consumers, when the monopolist is maximizing
its profit. (6 marks)
2) Find the monopoly’s total economic profit when it is maximizing its profit. (4 marks)
3) Indicate the area of consumer surplus under monopoly. (2 marks)
4) What would be the market price and the market quantity, if the industry in the figure was
perfectly competitive (Assuming a constant cost industry)? (4 marks)
5) Indicate the area of consumer surplus when the market is served by perfectly competitive
firms. (2 marks)
6) What is the area of the deadweight loss from monopoly? (2 marks)
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