Discuss the Difference Between Profit Maximisation and Revenue Maximisation for a Monopoly


SKU: Repo1002030 Category:

Economics for Business


Answer all of the following questions.

Q-1 Describe a Pigovian taxes. If Pigovian taxes are imposed in the presence of negative externalities then does this create a deadweight loss? Describe a real-world situation where a Pigovian tax will be applicable. Show using a diagram.


Q2- What might be the impact on police protection if the government in the state of Victoria decided to privatise police services in Melbourne? Show using demand and supply diagram? What will be the implications of this on crime rates?


Q3- Discuss the difference between profit maximisation and revenue maximisation for a monopoly. When will profit maximisation be equal to revenue maximisation? Will revenue maximisation reduce deadweight loss in a monopoly market? Provide detailed explanation and diagrams.


Q4- Analyse the effect of wage cuts on the Australian hospitality sector. How will the wage cuts change the food and beverage industry? Provide detailed explanation and diagram.


Q5- Suppose you are a consultant in the fitness industry and are called for advice by a manager of women’s fitness centre in Darwin that is only one year old. The manager reports that initially the centre made healthy profits but these disappeared after a year of operation, despite the fitness centre maintaining product quality. The manager is unable to determine the cause of this.

How will you explain the situation to the manager? Provide detailed diagrams with your explanation.


Q6- If the marginal cost facing a perfectly competitive firm is MC=(1/5)Q and the market price is $2. Find the firm’s profit maximising output and show this on a diagram. Suppose they are a total of 100 firms in the market. Find the total equilibrium output.


Q7- If the cost function for a firm is given TC=800+50Q. Find the total cost, fixed cost, variable cost, average variable cost, average total cost and marginal cost for output level of up to fifteen units. Draw average total cost, marginal cost and variable cost on a diagram.


Q8- Using demand and supply model, examine the effect of the following events on the price charged by Malaysian airlines:

a) the mysterious disappearance of Malaysian airline aircraft.

b) higher wages of airline personnel.

c) reduced interest of consumers to travel internationally due to increasing risk of economic downturn.

The answer must contain clear diagrams and explanations.


Q9- Explain the usefulness of marginal analysis in daily decisions using examples. Provide four to five examples to support your answer.


Q10- Suppose the Vice-Chancellors in Australia are deciding to raise fees for the courses provided at the University level. What factors should the Vice-Chancellors consider in this decision? What courses are likely to provide a greater increase in revenue if the fees are increased? Use the concept of elasticity to discuss your answer.

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