Question 1:

Refer to the graph below to answer the questions that follow.

Price

Per

Unit

50

40

30

28

10

O

10

20 25

3

2

Quantity/n10

20

25

Quantity

A. Write out the names of the curves represented by 1, 2 and 3 fully. Do not

merely use the symbols. (3 marks)

B. Identify the law curves 1, 2 and 3 obey. (1 mark)

C. Justify why curve 1 lies above curve 2. (1 mark)

D. Use points a and c and their respective price values to explain what the

vertical gap between two points represents. (2 marks)

E. How many products should be made if the producer wishes to achieve

maximum labour efficiency? (1 mark)

F. How many products should be made if the producer wishes to achieve

maximum productive efficiency? (1 mark)

G. Which market price would allow this producer to attain normal profit? (1 mark)

H. Which market price would allow this producer to attain economic profit? (1

mark)

1. At which price should the producer consider closing down? (1 mark)

(12 marks)