# BECC-101 : INTRODUCTORY MICROECONOMICS

BECC-101 : INTRODUCTORY MICROECONOMICS

Solved Assignment 2019-20

Course Code: BECC-101

Assignment Code: Asst /TMA /JAN 2020

Total Marks: 100

Assignment I

Answer the following Descriptive Category questions in about 500 words each. Each question carries marks. Word limit does not apply in application part of the question.

Q.1 (a) “A perfect competitive firm incurring losses in the short-run may loose even more by shutting down.” Discuss.

(b) Consider Figure 1 below where MC, ATC, AVC, D, and AR represent the marginal cost, average total cost, average variable cost, demand, and average revenue curve respectively under a perfect competition. Based on the figure, answer the following questions:

(i). What is the profit maximising level of output for this firm in the short-run? At this quantity, what is the marginal revenue?

(ii). How much is the total cost for this firm in the short-run equilibrium?

(iii) In the short run, is the firm making economic profit or suffering loss? How much is that profit or loss? Should the firm shut down?

(iv) What is the fixed cost of production faced by this firm?

(v) What is the break-even price for this firm? What is the shut down price for this firm?

(vi) If fixed cost increases further, what impact will this have on this firm’s profit maximising level of output in the short run?

OR

Figure 1 Profit, Revenue, Cost MC O Quantity ATC D = AR 50 AVC 55 15 20 30 45 48 4

(a) Using appropriate diagrams compare and contrast short-run equilibrium conditions with the long-run equilibrium condition faced by a firm in perfect competition.

(b) A firm in a perfect competitive market structure faces a marginal cost function given by

MC(Q) = 4Q + 5

where Q represents quantity of output produced. This firm earns marginal revenue of Rs 25 on each unit sale of its output. Suppose this firm decides to produce 3 units of output, is this a profit maximising decision by the firm? If not, how much should this firm produce to earn maximum profits? In the long-run will this firm earn negative economic profits, positive economic profits, or zero economic profits?

Q.2 (a) Discuss the income and substitution effects of a price change in case of an inferior good.

(b) Consider the demand curve AC of a good in Figure 2. Given distance AB and BC as x and y, units respectively,

(i). What will be the price elasticity of demand for the good at point B? What will be the price elasticity of demand for the good at point A and at point C?

(ii). Given that price elasticity at point B is 1, how x and y will be related?

OR

(a) A Giffen good is a special type of inferior good. Do you agree? Give reason.

(b) (i) Consider Figure 3, where DD’ represents a rectangular hyperbola shaped demand curve for a good. Find the price elasticity of demand for this good at point A and point B.

(ii) Given the price elasticity of demand for a good as 0.6. Suppose price of this good decreases by 10%, what would we expect to happen to the quantity demanded? Quantity Price A B C V x V y V Figure 2 B A Quantity Price D D’ Figure 3

Assignment - II

Answer the following Middle Category questions in about 250 words each. Each question carries 10 marks. Word limit does not apply in application part of the question.

Q.3 Explain why a monopolist does not have a well-defined supply curve?

OR

A Monopoly faces market demand given by Q = 30 – P, where Q stands for quantity and P for price. Total cost function is given by C(Q) = 2Q2. Find the profit maximising price and quantity and the resulting profit to the monopoly. Compare your results with the equilibrium quantity and price of that of a perfect competitive industry.

Q.4 Draw a kinked demand curve and show how a change in marginal costs may not affect the price in the market.

OR

(a) Discuss the strategic decision making in Oligopoly markets.

(b) Differentiate between the assumptions of a Cournot’s model and the Stackelberg model.

Q.5 (a) What is meant by the productive and allocative efficiency conditions for a firm?

(b) Is monopoly productively and allocatively efficient?

OR

(a) Discuss various forms of departures from the assumptions of a Perfect competitive market structure.

(b) How does a Pigouvian tax works to solve the externality problem?

Assignment - III

Answer the following Short Category questions in about 100 words each. Each question carries 6 marks.

6. Illustrate the relation between the Value of Marginal product and Marginal Revenue product of a factor under imperfect competition.

7. Compare and contrast Marshallian theory with the Ricardian theory of rent.

8. What is meant by derived demand of a factor?

9. Discuss the central problems of an Economy.

10. Explain the First Fundamental Theorem of Welfare Economics.

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IGNOU Assignment Status 2020 – Complete details and Solutions to the status like not updated, not completed, not submitted are answered here. IGNOU assignment submission process will end today (15th June 2020). the scholars who have submitted the assignment must be trying to find the status of their submission. The IGNOU assignment status is live and you'll check it by using the link given at the top of this page.

IGNOU Assignment Status 2020

The assignments of this year were accepted online and IGNOU extended the last dates repeatedly . Now because the last submission date is here, the assignment status is vital to see . Students can check whether their assignment is submitted and accepted successfully. The assignment status is typically updated within 3-4 weeks from the submission dates. Sometimes, IGNOU may take up to 40 days to update the status.

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