Instructions – PLEASE READ THEM CAREFULLY
· The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
· Assignments submitted through email will not be accepted.
· Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
· Students must mention question number clearly in their answer.
· Late submission will NOT be accepted.
· Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
· All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).
· Submissions without this cover page will NOT be accepted.
1) Consider the long-run production of Bicycles. The cost of the indivisible inputs used in the production of bicycles is $6000 per day. To produce one Bicycle per day, the firm must also spend a total of $80 on other inputs-labor, materials, and other capital. For each additional bicycle, the firm incurs the same additional cost of $80.
a) Compute the average cost for 30 bicycles, 60 bicycles, 100 bicycles, and 300 bicycles. (1 marks)
b) Draw the long-run average cost curve for 30,60,100 and 300 bicycles per day. (1 marks)
2) Draw a graph of perfectly competitive market and explain equilibrium of the firm by choosing output level at which
a. P=MC=MR and Firm is making zero economic profit (1 Mark)
b. P=MC=MR and Firm is making a loss (1 Mark)
c. Explain shut down rule with the help of graph (1 Mark)