Eco401 Assignment No. 2 solution

“Economics (ECO401)”

This is to inform that Assignment # 02 (covering video lecture no. 1 to lecture no 32)

will be uploaded on VULMS according to the following schedule

Schedule

Opening Date and Time

July 05, 2010 At 12:01 A.M. (Mid-Night)

Closing Date and Time

July 08, 2010 At 11:59 P.M. (Mid-Night)

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Assignment # 02
Question 01
Draw the graph showing that a perfectly competitive firm is making zero profit or
normal profit in the market.
(Marks: 5)

Question 02
Draw the graph showing that a monopoly firm is making super normal profits in
the market.
(Marks: 5)
(Note: In Q # 01 and 02, just draw graphs by yourself. Do NOT copy from any
source. NO need to write any irrelevant material or interpretation.)

Question 03
Consider a hypothetical economy which produces oranges and chicken.
Quantity and cost of both things are given in the table. Calculate the
following from the given information:
a) Nominal GDP in year 2009
b) Nominal GDP in year 2010
c) Growth rate of nominal GDP
Year 2009 Year 2010
Oranges produced 200 250
Chicken produced 150 170
Cost per orange (Rs.) 10 15
Cost per kg chicken (Rs.) 110 155
(Marks: 2+2+1)

(Note: Just calculate to the point in each part. NO need to write irrelevant
material or extra interpretation.)

................

Q-1 solution

Q-2 solution

Question #3 Solution....
Solution#3
• Nominal GDP in 2009 = (200 x 10) + (150 x 110) = 18500
• Nominal GDP in 2010 = (250 x 15) + (170 x 155) = 30100
• Growth rate in nominal GDP = 30100 – 18500/18500 = 62.70%

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Assignment No.2

Q. 1
Draw the graph showing that a perfectly competitive firm is making zero profit or
normal profit in the market.


MC
Price AC

P
Demand P=MR=AR




0 Q Quantity

Q. No 2
Draw the graph showing that a monopoly firm is making super normal profits in
the market.

P


MC

Pm AC
AC

MR D=AR
Qm




Q. No. 3
Calculate Nominal GDP 2009 and 10=?
Nominal GDP 2009 = (Unit produced * Cost)(200 x 10)+ (150x110)
= 2000+16500
= 185000
Nominal GDP 2010 = (250 x 15) + (170 x 155) 
= 3750+26350
= 30100
Growth rate in nominal GDP = 
=30100 – 18500/18500
= 62.70%

.............

Question 03
Consider a hypothetical economy which produces oranges and chicken. Quantity and cost of both things are given in the table. Calculate the following from the given information:
a) Nominal GDP in year 2009
b) Nominal GDP in year 2010
c) Growth rate of nominal GDP
Year 2009 Year 2010
Oranges produced 200 250
Chicken produced 150 170
Cost per orange (Rs.) 10 15
Cost per kg chicken (Rs.) 110 155
(Marks: 2+2+1)


Solution:-

• Nominal GDP in 2009 = (200 x 10) + (150 x 110) = 18500 

• Nominal GDP in 2010 = (250 x 15) + (170 x 155) = 30100 

• Growth rate in nominal GDP = 30100 – 18500/18500 = 62.70%