QUESTION 4

1. Use the following demand-and-cost information for a profit maximising firm, to answer the questions that follow. (Note: Q* indicates profit-maximising output level). Highest price where Q is zero (Ph) = R1600 Price (P*) = R900 Mark-up* = 5 AFC at Q* = R240 TVC at Q* = R67200 TFC = R28800 Price at allocative efficient output level = R600 Allocative efficient level of output = 300 units MC where Q is zero = R60 4.1. Assuming profit maximisation behaviour, calculate each of the following for the firm. Q* = units Total revenue at Q* = R MC = R AVC = R ATC = R Profit/loss = R Consumer-surplus = ; ....(2 marks) DWL = ; ....(2 marks)

4.2 Calculate each of the following at allocative efficient level of outcome. Consumer-surplus = ; ......(2 marks) Producer-surplus = ; ......(2 marks) AFC =

15 points