Question 1 Perfect Competition (Assumptions) (5 marks)
It is claimed that the market for various stocks and shares represent Perfect Competition. Using the assumptions used to build the perfect competition model, justify the case that shareholders of BP represent a structure that is almost the same as perfect competition.
Question 2 Perfect Competition (Profit Maximization) (20 marks)
New Zealand egg market represents a perfectly competitive industry where almost all the firms are identical with identical cost structures. The industry consists of many thousands of small farms and a representative firm’s total cost is given by the equation TC = 100 + q2 + q where q is the quantity of output produced by the firm. Eggs are sold in cartons of 125 one dozen boxes. The market demand for eggs is given by the equation P = 1000 – 2Q where Q is the market quantity and the market supply is represented by the equation P = 100 + Q.
a. Formulate an equation to illustrate the New Zealand egg market and calculate the equilibrium quantity and price in this market. (4 marks) Get Economics homework help today
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