Economics Coursework - 550 Words

Economics Coursework (Coursework Sample) Content: 1 The illustration above in zero economic profits means that the firm canà ¢Ã¢â€š ¬t produce anything beyond the opportunity cost of productions though the revenues do cover the cost of inputs. This market will remain at the long-run equilibrium, since the firm will neither enter nor exit in the industry. Also, free entry and exits ensures that the equilibrium output is such that the surviving firm ensures normal profits, in this case zero economic profits. 2 Minimizing losses in the short-run by operating at a loss in this case where the firm continues operating even if it incurs loss. This is the best solution rather than closing down the firm. The number of firms remains steady in neither short-run, whereby no firm can enter nor exit. When the market price exceeds the average variable cost, the revenue generated by the firms will then cover the variable cost and some revenue left over to offset the fixed costs. The quantity supplied by each firm will decrease and remain steady to where it can sustain to operate in the conditions. Thus, the quantity supplied in the market may not meet the required demand by the customers, since the quantity will neither decrease nor increase till the firms are out of operating at loss. 3 Monopoly is a market that where production under the control of a single supply. In the monopoly market structure, the average revenue is not the same as the marginal revenue unlike in perfect competition. The marginal revenue is less than the average revenue because when the monopolist wants to sell more, they must reduce the price on either units and this prevents the competition from happening. 4 Economic profits are driven to zero when the demand curve and the average total cost curves are tangent to each other. In this case, the prices are equal to average total cost and thus the firms will earn zero economic profit. The quantity of outputs in the monopolistic competition is much smaller than the quantity that minimizes average total cost. But in perfect competition, price is equal to the minimum average total cost thus the firms produce at their efficient scal...