ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Economics)

WARNING
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING
THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD
OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM
OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN
“AIOU PLAGIARISM POLICY”.
Course: Introduction to Microeconomics (801) Semester: Autumn, 2017
Level: MSc Economics Total Marks: 100
Credit Hours: 03 Pass Marks: 40
ASSIGNMENT No. 1
(Units 1–5)

Q.1 Discuss that the concept of an industry has a very useful role in economic
theory. (20)

Q.2 Using necessary and sufficient conditions explain consumer’s equilibrium

mathematically. (20)

Q.3 a) Define “elastic demand” and “inelastic demand” by using daily life
examples. (10)

b) Discuss the determinants of market demand. (10)

Q.4 a) Derive an isoquant and give its properties. (10)

b) Find the equilibrium of L and K subject to a given output: (10)

Minimize cost: C = 40K+ 20L Subject to Q = 60 L K= 3000

Q.5 Explain the following terms with examples:

i) Long-run and Short-run (05)

ii) Fixed and Variable cost (05)

iii) Average and Marginal cost (05)

iv) Economies and Diseconomies of scale (05)

1
 ASSIGNMENT No. 2
(Units 6–9)
Total Marks: 100 Pass Marks: 40

Q.1 Suppose the demand for Frisbees is given by (05+05+10)

Q= 100-2P

And the supply by

Q= 20-6P

a) What will be the equilibrium price and quantities for Frisbees?

b) Suppose the government levies a tax of Rs: 4 per freebies. Now what will the
equilibrium quantity, the price consumers will pay, and the price firms will
receive?

c) How would your answers to parts (a) and (b) change if the supply were
instead Q= 70+ P

Q.2 a) Explain the circumstances that give rise to monopoly. (10)

b) Explain Multiplant Monopolist’s equilibrium (10)

Q.3 a) Explain theory of monopolistic competition in its historical perspective. (10)

b) In what way the assumptions of monopolistic competition differ from

assumptions of those of perfectively competitive model? (10)

Q.4 Explain Stackleberg’s model of Duopoly, is it an extension of Cournot model? (20)

Q.5 What do you know about the direct and indirect effects of the decision taken by
the firms? Explain your answer in the light of Chamberlin’s oligopoly model. (20)