Microeconomics

MICROECONOMICS

Question 1

In economics, the relationship between the revenue and the profit is used to understand the standing of the business and its worth that a company holds. Total revenue is basically the income that has been generated by the sale of the company's goods that are produced. On the other hand, the profit is the amount that comes after the deduction of the total costs that a company occurs. So the profits are the one which are the exact earnings of the company after the deduction of the spending while the revenue is includes the cost that is to be deducted as the profit will calculated (Stackelberg, 2011).

Question 2

Marginal Cost Curve

The shape is because of the change in the total cost when the quantity is raised by a unit.

Average Variable Cost

Average variable cost is the effected by the division of the quantity, which cause the curve to increase as the quantity produced, are realized after a span of time.

Average Cost Curve

The average cost curve can be of U shape because of the rise and fall of the costs. Each additional unit cause the cost to decrease that is why the cost curve us upward.

Question 3

Talking about the market structure in economics, when the businesses tend to produce the products which are identical and are produced homogeneously, the situation is termed as market structure. There are different types that are related to the market structure, known as Monopolistic competition, Oligopoly, natural monopoly etc. The factors that are considered important in considering the market structure of the industry include four aspects.

It includes the information regarding the buyer and sellers as they are the one dealing with the sale and purchase of the products. Other important factor includes the entry and the exit of the firms in the market. The Demand and Supply are the major factors that determine the market structure for the industry (Stackelberg, 2011).

Question 4

The market structure that is known as the perfect competition, it is the structure where there are no barriers for the firms in order to trade. There is free entry and exit from the market, which is why there is no single firm that can hold the majority of the market power. That is why it is called as the pure competition because there are no barriers for the trade purpose. At times, perfect competition scenarios are assumed by the economists in order to compare it with the other structures. The market structure that is known as the perfect competition, it is the structure where there are no barriers for the firms in order to trade. That is why the firms try to maximize their strength for the competitive advantage in order to gain the profits an d the increase in th sales (Machovec, 1995).

Question 5

The reason that the supply curve of the perfectly competitive firm is above the minimum level of the cost curve is because firms are seeking maximum profits in the perfectly competitive markets (Machovec, ...