BMZ ACADEMY
BMZ ACADEMY
@061 262 1185/068 053 8213
BMZ ACADEMY 061 262 1185/068 053 8213
, ECS1501-24-Y Assessments Assessment 9
QUIZ
Started on Tuesday, 24 September 2024, 3:18 PM
State Finished
Completed on Tuesday, 24 September 2024, 3:29 PM
Time taken 10 mins 32 secs
Marks 11.00/11.00
Grade 100.00 out of 100.00
Question 1
Complete
Not graded
I confirm
that this assessment will be my own individual work;
that I will not communicate with anyone else in any way during the completion
of this assessment;
that I will not cheat in any way in completing and submitting this assessment.
I confirm.
I do not confirm.
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, Question 2
Complete
Mark 1.00 out of 1.00
A perfectly competitive market is described as a market with
a few firms producing differentiated goods.
a large number of firms that each individually sets the price of their goods.
a few buyers, many sellers and the production of differentiated goods.
many buyers, many sellers and the production of homogenous goods.
In a perfectly competitive market, there are many buyers and sellers, all of
whom are small relative to the size of the market. This market structure is
characterised by several key features:
1. Many Buyers and Sellers: There are numerous buyers and sellers in the
market, and no single buyer or seller has the power to influence the
market price. Each buyer and seller is a price taker, meaning they accept
the market price as given and cannot change it.
2. Homogeneous Products: The products or services sold in a perfectly
competitive market are homogeneous (meaning they are identical and
indistinguishable from one another).
3. Perfect Information: All buyers and sellers in a perfectly competitive
market have access to perfect information. T
4. Free Entry and Exit: There are no barriers to entry or exit in the market.
5. Firms are Price Takers: Each firm in a perfectly competitive market is so
small compared to the overall market that its actions cannot affect the
market price. Therefore, each firm accepts the market price as given and
adjusts its quantity of output to maximise profits at that price.
6. Profit Maximisation: Firms in a perfectly competitive market aim to
maximise profits.
7. No government intervention: The market answers the questions What?
How? and For whom
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, Question 3
Complete
Mark 1.00 out of 1.00
In the short run, when should a firm continue with production according to the
shut down rule.
average revenue (AR) is equal to, or greater than, average variable cost
(AVC).
average revenue (AR) is less than average cost (AC), and average cost
(AC) is less than average variable cost (AVC).
average revenue (AR) is greater than average cost (AC).
marginal revenue (MR) is greater than marginal cost (MC).
The shutdown rule can be expressed in terms of average revenue (AR) and
average variable cost (AVC). The shutdown rule states that a firm should
continue production in the short run if the price or average revenue (AR) it
receives for its product is greater than or equal to the average variable cost
(AVC) at the profit-maximising level of output (P= AR = MC).
If AR ≥ AVC, the firm should continue production. This means the firm can
cover both its variable costs and make a contribution towards its fixed costs.
While the firm may not be covering all its costs (including fixed costs), it is
minimising its losses by covering the variable costs.
If AR < AVC, the firm should shut down production. In this situation, the firm
cannot even cover its variable costs with the price it receives for its product.
Continuing to produce would mean incurring losses greater than the fixed
costs alone. By shutting down, the firm avoids variable costs and limits its
losses to its fixed costs.
The shut-down rule does not only indicate when a firm should stop production,
it also indicates that a firm will continue with production as long as the AR = P
is equal to or greater than the average variable cost (AVC). The rising part of the
firm MC curve, above the minimum of AVC, can thus be regarded as the firm’s
supply curve.
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