Answer all four questions. For each question write a maximum of 500 words. Each question is worth 25% of the total mark for the coursework.
Word count: 800-900
Diagrams are mandatory for each question.
1. Using supply and demand diagrams show the effects of the following changes on the price and quantity of cars:
a) an increase in the price of petrol;
b) a rise in incomes;
c) a rise in wages for car workers and a fall in the price of bus tickets (both at the same time).
In each case, explain the assumptions you are making about how the changes affect supply or demand.
2. Explain, using a diagram (or diagrams), why firms maximize profits where marginal cost equals marginal revenue.
3. Draw a diagram to show a competitive firm’s shortrun production decision. Use the diagram to explain why, in the short run, a firm in a perfectly competitive industry may continue to produce when it makes a loss.
4. Draw a diagram to show the difference in output and price between a perfectly competitive market and monopoly. Explain why monopoly results in a welfare loss compared to a perfectly competitive market.
5 hours agoATTACHMENTScoursework_2018.p