Use a ruler and pencil for these ten diagrams – I will give them a mark of 5 each
Diagram 1: Draw the long run average cost curve and marginal cost curve and profit
maximisation output for a natural monopoly
Diagram 2: Draw the revenue maximising equilibrium for a firm in a monopolistic market
with a relatively inelastic demand curve
(AR)
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Diagram 3: Draw the kinked demand curve for an oligopoly – also include the marginal
cost curve
Diagram 4: This diagram covers the price and output for a firm in a contestable market – on
the same diagram draw (i) the profit maximising price and output and (ii) a possible
satisficing price and output – if the firm decides to cut prices in light of threatened
competition
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Diagram 5: Label the curves shown and then draw the effects of a rise in variable costs for
an airline whose aim is profit maximisation
Diagram 6: Draw the effect of a pollution tax on a product where there are negative
externalities arising from production
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Diagram 7: Draw the likely long run equilibrium for a perfectly competitive market given
the short run equilibrium below
Individual Firm’s Costs and Revenues
Market Demand and Supply
Price (P)
Price (P)
MC (Supply)
Market
Supply
AC1
AR (Demand) = MR
P1
P1
1
AC
Market
Demand
Q1
Output (Q)
Q2
Output (Q)
Diagram 8: Show the deadweight loss of welfare associated with a profit maximising
monopoly compared to the outcome expected in a competitive market.
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Diagram 9: Show how price fixing may occur in a collusive oligopoly
Price
Individual Firm inside the Cartel
Price
Industry Costs and Revenues
MC
MC (industry)
AC Pm (cartel)
Demand
MR
Firms Output
Industry Output
Diagram 10: Draw third degree price discrimination under a monopoly
Price
Market A
Price
Market B
MC of supply
Output
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Output