GREATMINDS TUTORIALS RANDBURG JOHANNESBURG
ECS2601 ASSIGNMENT 2
SECOND SEMESTER 2020
CONTACT 0790404390 FOR ASSISTANCE AND SUGGESTIONS.
, ECS2601 ASS 2 Second semester 2020
1. If current output is less than the profit-maximizing output, then the next unit produced will…
[1] Decrease profit.
[2] Increase cost more than it increases revenue.
[3] Increase revenue more than it increases cost.
[4] Increase revenue without increasing cost.
[5] Leave profit unchanged.
Explanation-(3)This means that MR>MC therefore the firm must increase the output which it produces,
therefore the next unit produced will increase revenue more than it increases cost, approaching the profit
maximizing qnty where MR=MC
2. In a perfectly competitive industry, the amount of output that a firm decides to sell has no effect
on the market price, because…
[1] the market price is determined through regulation, by the government.
[2] the firm supplies a different good than its rivals.
[3] the firm’s output is a small fraction of the entire industry’s output.
[4] the short-run market price is determined solely by the firm’s technology.
[5] the demand curve for the industry’s output is downward sloping.
Explanation-(3) Because of one of the special characteristic of perfect completion: characterized by many
sellers –this implies that the impact of one firm in terms influencing the industries is insignificant
Answer question 3 using the following diagram, where a perfectly competitive firm faces a price of R40.
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2
ECS2601 ASSIGNMENT 2
SECOND SEMESTER 2020
CONTACT 0790404390 FOR ASSISTANCE AND SUGGESTIONS.
, ECS2601 ASS 2 Second semester 2020
1. If current output is less than the profit-maximizing output, then the next unit produced will…
[1] Decrease profit.
[2] Increase cost more than it increases revenue.
[3] Increase revenue more than it increases cost.
[4] Increase revenue without increasing cost.
[5] Leave profit unchanged.
Explanation-(3)This means that MR>MC therefore the firm must increase the output which it produces,
therefore the next unit produced will increase revenue more than it increases cost, approaching the profit
maximizing qnty where MR=MC
2. In a perfectly competitive industry, the amount of output that a firm decides to sell has no effect
on the market price, because…
[1] the market price is determined through regulation, by the government.
[2] the firm supplies a different good than its rivals.
[3] the firm’s output is a small fraction of the entire industry’s output.
[4] the short-run market price is determined solely by the firm’s technology.
[5] the demand curve for the industry’s output is downward sloping.
Explanation-(3) Because of one of the special characteristic of perfect completion: characterized by many
sellers –this implies that the impact of one firm in terms influencing the industries is insignificant
Answer question 3 using the following diagram, where a perfectly competitive firm faces a price of R40.
‘
2
