. (a) State and explain the assumptions underlying the theory of Imperfect Competition.

(b) Draw the demand curve which faces a firm in imperfect competition and justify its shape.

(c) Discuss, with the aid of a clearly labelled diagram, the implications of the assumptions in (a) above, on

the equilibrium of the firm in the long run under conditions of imperfect competition.

(d) State ONE FEATURE of this firm in long run equilibrium which would be common to a firm in long

run equilibrium under EITHER perfect competition OR monopoly.

2. (a) Define what is meant by price elasticity of demand.

(b) A consumer buys 80 units of a good when the price is 1.50. The price increases to 1.75 and the

consumer now buys 70 units.

ii(i) Using the formula below, calculate the consumer's price elasticity of demand. Show all your

workings.

Q x P1 + P2

P Q1 + Q2

i(ii) Is demand for this good elastic, inelastic or unitary elastic?

(iii) The seller of the above good wishes to earn maximum revenue. What changes, if any, should

the seller make in the selling price of the good to earn maximum revenue? Explain your answer.

(35 marks)

(c) State and explain FOUR factors that affect price elasticity of demand. (30 marks)

[75 marks]

3. (a) State FOUR factors that affect the supply of a good, other than the price of the good itself, and explain

how each factor affects supply.

(b) State and explain the principal economic assumptions made about consumer behaviour.

(c) The law of diminishing marginal utility states that as additional units of a good are consumed the

marginal utility of this good will eventually decline.

ii(i) State and explain the assumptions underlying the law of diminishing marginal utility.

i(ii) Give TWO examples of commodities which do not comply with this law. Justify each choice with

a brief explanation.

(25 marks)

[75 marks]

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4. (a) A principal factor determining the wages to be paid to a worker is the Marginal Revenue Productivity

of Labour (MRP).

(i) Explain what is meant by the underlined term.

(ii) Discuss the factors, other than MRP, which influence the wage rates paid to different categories of

workers.

(b) How appropriate is MRP for setting wages in the public sector? Explain your answer

(c) At present, the demand for labour exceeds the supply of labour in certain sectors of the Irish Economy.

Discuss the possible economic effects which this situation may have on the Irish economy.