MTN-SA 15:09 * 40% Done BCOM IT Year 1 PH JULY 2018... A MANCOSA:BCOM (INFORMATI

Question

MTN-SA 15:09 * 40% Done BCOM IT Year 1 PH JULY 2018... A MANCOSA:BCOM (INFORMATION AND TECHNOLOGY MANAGEMENT) YEAR 1 57 Use the following diagram in which the monopoly depicted is maximising profit to answer the following question. AC Quantity 1.10 What is the total profit? a) R3 b) R4 c) R6 d) R9 QUESTION 2 (20) 1 Briefly explain price elasticity of demand and how it is measured. 22 Explain with well labelled dagrams the FIVE (S) categories of price elasticity of demand (15 (30) 3.1 Assume that the market price for a Skg bag of rice is R80 and the government has announced that a Skg bag QUESTION of rice cannot be sold for less than R100 With the aid of a well labelled diagram, explain the effect the above govemment decision will have in the (10) market for rice 3.2 Suppose that as a result of the listeriosis outbreak, the department of health has warned against the consumption of Viennas. Explain using a properly labelled diagram, the effect of this in the market for (20) Viennas, ceteris paribus 3.3 DiscusS ANY FIVE (5) factors that could lead to an increase in the demand for Viennas. (10) 57

Explanation / Answer

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Ans 1.10: For a monopoly, the profit maximization condition is: MR=MC

As per the diagram, MR is intersecting MC, there we can determine the equilibrium quantities and price:

Equilibrium Quantity: 3 units

Equilibrium Price: $6

Profit: Total Revenue - Total Cost

Total Cost = Average Cost* Quantity =* 4*3 - $12

Total Revenue= Price*Quantity = $6*3 = $18

Total Profit = $18-$12 = $6

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