MICROECONOMICS 5 Source Bade Parkin 2017 ii In an increasing cost market

Microeconomics 5 source bade parkin 2017 ii in an

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MICROECONOMICS 5 Source: ( Bade & Parkin, 2017) ii) In an increasing cost market, expansions result in rise in industry and firm outputs, which force costs to increase (Frank et al., 2018). Here, the industry is in equilibrium at output OQ and price OP. Corresponding to price OP, all firms produce Oq and are in equilibrium whereby P = AR = MR = LAC.
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MICROECONOMICS 6 Source: ( Bade & Parkin, 2017) Question 6 i) Tax on the polluter based on damages caused can mitigate pollution. As outlined in the figure below, X is the output level if pollution costs are flouted while K is the ideal production level. Source: (Frank et al., 2018) The government can adopt a regular flat-rate tax QZ on output – this will remove any incentives to raise production above the accepted level K. ii) Minimizing the overproduction of farm outputs as shown below can also reduce pollution. A farmer produces Q1 whereby marginal revenue equals marginal private cost; however, the socially efficient output level is Qo, which considers the extra social costs of farm production.
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MICROECONOMICS 7 Source: ( Bade & Parkin, 2017) Question 7 a) In microeconomics, whenever the price per unit surpasses the average variable cost per unit whether in the long or short run, the outcome is positive. This implies that a firm is making profits from selling its services or products and its operations should continue ( Bade & Parkin, 2017). Since profit is the goal of any firm, the need to continue operation becomes inevitable. b) The production point whereby marginal cost and marginal revenue are equivalent is a point of zero economic profit (the break-even point). In this case, total cost minus total revenue is zero, and price (P) per unit minus average cost (AC) per unit is zero.
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MICROECONOMICS 8 Source: (Frank et al., 2018)
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MICROECONOMICS 9 References Bade, R., & Parkin, M. (2017). Foundations of microeconomics . New Jersey: Pearson Education Limited. Frank, R. H., Bernanke, B., Antonovics, K., & Heffetz, O. (2018) Principles of Microeconomics. McGraw-Hill Education.
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  • Fall '15
  • Mr. Njoroge
  • Economics, Bade & Parkin

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