- 6 - N15/3/ECONO/HP3/ENG/TZO/XX 2. The following diagram illustrates the demand and cost conditions of a firm. MC 20.00 18.00 AC Price ($ per unit) 12.00 11.00 10.20 5.00 D, AR 17 20 23 26 MR Quantity per period (thousands of units) (a) Identify whether this firm is in perfect competition. You must give a reason for your choice. [2] . . . . . . . . . . . (This question continues on the following page) 6EP06N15/3/ECONO/HP3/ENG/TZO/XX 7 (Quest - 7- (Question 2 continued) (b) Identify the profit maximizing level of output for this firm. You must give a reason for [2] your choice. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . .... . . . . . . (c) Calculate the total revenues and the total costs and the profits or losses for this firm at the profit maximizing level of output. [3] . . . . . .. . . . . . . . . . . (d) Identify the level of output this firm would choose if instead of profit it aimed at maximizing revenues. You must give a reason for your choice. [2] . . (This question continues on the following page) Turn overTZOXX - 8 - N15/3/ECONO/HP3/ENG/TZO/XX (Question 2 continued) (e) Explain the meaning of the term "allocationefficiency" and its implication for social (community) surplus. [4] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (f) Referring to the diagram on page 6, identify the level of output that should be produced for allocation efficiency to be achieved. You must give a reason for your choice. [2] . . . . . . . . . . . . . . . . P.. . (g) Define the term productive efficiency. . . . . . . . . . . . . . . . . . . . (This question continues on the following page)