ECON0002: Economics Term 1, 2019-20
Assignment 7
Please note that this assignment should be submitted using the relevant Turnitin link on Moodle.
Before you do so, you will need to complete the Self-Evaluation Survey.
COMPLETE ALL MCQs IN UNIT 7 OF THE E-BOOK. In preparation for this tutorial, you
should complete ALL the multiple choice question in the free e-book, The Economy. Please note
that each incorrect option has an explanation attached to it which will be shown if you choose
that option. Use this feature to further your understanding. In your tutorial you can ask and
discuss those questions you found particularly difficult.
COURSEWORK COMPONENT TO BE SOLVED BEFORE CLASS AND UPLOADED
VIA TURNITIN: Answer the following 2 questions and submit them through the Turnitin link
(in the Tutorial Assignments Block) on the Moodle page. Please type your answers if at all
possible, and scan in any hand-drawn diagrams etc. Submitting your questions is part of the
coursework component for this course. Failing to do so may affect your eligibility to take the
final exam.
IN THE TUTORIAL: You will be asked to complete at least ONE additional MCQs during the
tutorial. This question will be more representative of the questions you will be asked in the
exams. The e-book MCQs are essential preparation for the tutorial, for the additional MCQs, and
eventually for the exams.
In addition, we will discuss the two questions below, which you will have prepared and
submitted before the tutorial. Your tutor will give you written feedback in Turnitin on one of the
questions and will give verbal group feedback during the tutorial.
ECON0002: Economics Term 1, 2019-20
University College London
Question 1.
1. A monopolist is facing a demand function Q = 20 – P. The monopolist has a cost
function C(Q) = 90 + 2 . Please answer this question graphically and also analytically
whenever possible.
a. If the monopolist charges a uniform price to all its customers, what is the profitmaximizing
price, and quantity? What is the profit and the consumer surplus?
b. Suppose the government does not like the outcome in the previous question. What
is the minimum price it can force the monopolist to charge that is consistent with
the monopolist operating, and why? What would the government need to do to
increase the surplus even further? What are the difficulties in achieving this
objective?
c. How could the monopolist increase profits even further? What is the maximum
possible profit achievable in this market, and how can it be achieved?
ECON0002: Economics Term 1, 2019-20
University College London
Question 2:
In The Economy, answer Exercise 7.3, Unit 7:
Below you can see the average and marginal costs per student for the year 1990-1 that Koshal
and Koshal calculated from their research.
1. How do average costs change as the numbers of students rise?
2. Using the data for average costs, fill in the missing figures in the total cost column.
3. Plot the marginal and average cost curves for undergraduate education on a graph, with costs
on the vertical axis and the number of students on the horizontal axis. On a separate diagram,
plot the equivalent graphs for graduates.
ECON0002: Economics Term 1, 2019-20
University College London
4. What are the shapes of the total cost functions for undergraduates and graduates? (You could
sketch them using what you know about marginal and average costs.) Plot them on a single chart
using the numbers in the Total cost column.
5. What are the main differences between the universities’ cost structures for undergraduates and
graduates?
6. Can you think of any explanations for the shapes of the graphs you have drawn?