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to be perfectly elastic (i.e. horizontal at the going market price).
[5 marks] d) Explain why the demand curve facing a monopolist is less elastic than one
facing a firm that operates in a monopolistically competitive market (all other
factors held constant).
[5 marks] [TOTAL : 20 MARKS] 11 BMME5103/SEPT 07-F/KN Question 4
Malaysian Export-Import Shipping Company (MEISC) operates a general cargo
carrier service between Port Klang and several European ports. It hauls two major
categories of freight: manufactured items and semi-manufactured raw materials. The
demand functions for these two classes of goods are:
P1 = 100 – 2Q1
P2 = 80 – Q2
where, Qi = tons of freight moved. The total cost function for MEISC is
TC = 20 + 4(Q1 + Q2)
a) Calculate the firm’s total profit function.
[4 marks] b) What are the profit-maximising levels of price and output for the two freight
[4 marks] c) At these levels of output, calculate the marginal revenue in each market.
[4 marks] d) What are MEISC total profits if it is effectively able to charge different prices in
the two markets?
[4 marks] e) If MEISC is required by law to charge the same per-ton rate to all users,
calculate the new profit-maximising level of price and output. What are the
profits in this situation?
[TOTAL : 20 MARKS] [TOTAL : 100 MARKS] QUESTION PAPER ENDS HERE 12...
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This document was uploaded on 02/09/2014.
- Spring '14