DIPLOMA IN BUSINESS
Course Title Microeconomics Assignment
Course Code ECO 1013
Name Low Yi Wen
Student ID DB2209266
ECO 1013 Individual Assignment Page 1
GRADING SHEET
Marks
Weighting
No. Assessment Awarded
(%)
1. Task 1 20%
2. Task 2 20%
3. Overall impression:
• Cover page, Content page
• Headings, subheadings and overall layout
• Correct font, font size and line spacing 10%
• Page number and alignment
• Structure, spelling, grammar, choice of words, etc
• Correct Harvard Referencing style
4. TOTAL: 50%
5. TOTAL * 2 100%
ECO 1013 Individual Assignment Page 2
Student’s Declaration
I certify that this assignment is my own work, and appropriately acknowledged wherever
material adapted from other sources. I understand that plagiarism, cheating, collusion, fraud,
fabrication or falsifications of data are not acceptable. I agree that if at any time it is shown that I
have significantly misrepresented material submitted to Crescendo International College, any
marks or credits awarded to me on the basis of that material may be revoked.
Student Name LIM SZE EN Student ID DB2209265
Signature LIM SZE EN Date 25 October 2022
ECO 1013 Individual Assignment Page 3
Task 1
1. BA’s costs are higher than its competitors because it has required pre-booking seats, and
provide special lounges for frequent flyers and do not offer free drinks and food. It has
offered some facilities that their competitors do not offer. It also has to pay expensive landing
charges at the airports it uses.
2. No, it is an oligopoly. The market for airlines is a price maker, thus even while everyone can
see what each airline charges and all airlines publish its costs, this does not guarantee that the
market is completely competitive. Additionally, it has a high market concentration and is
dominated by a small number of very large enterprises. Due to the high entrance
requirements, including the high cost of capital and the need for economies of scale, it also
has substantial entry barriers.
3. It will have to produce the slightly different type of product with their competitors, such as
by advertising their products with a strong incentive. Moreover, it is a price maker, so it not
need to follow the market prices, which means that the prices it sets would influence the
number of customers it has. It has the freedom to make entry and exit this market, because it
does not have the strict rules and regulations to ban it. Since it does not need to follow the
market prices, so it will have the imperfect information to present to others.
4. From the government side, they intervene to make air service affordable for travelers.
Reducing taxes on all airlines will affect airlines to raise their prices to passengers because
the cost they need to pay becomes high, so they need to raise prices to cover their high tax
costs. The rise in subsidies will result in lower costs for the airlines and provide them more
options for managing their business, preventing them from deciding to raise prices for
travelers. There must be a mechanism that allows the government to intervene to keep fares
low, especially during seasonal holidays, just like the toll discounts offered to highway users
during Aldilfitri. So, government can implement the plan for reduce the toll on the way to the
airport.
ECO 1013 Individual Assignment Page 4
Task 2(a)
(i) TC = 2q
MC = dtc/dq
= RM2
P = MC
= RM2
(ii) Q=6–P
=6–2
= 4 units
(iii) Profit = TR – TC
= (P x Q) – (AC x Q)
= (2 x 4) – (2 x 4)
=8–8
= RM 0
Task 2(b)
(i) STEP 1
Q = 90 – P
-P = Q – 90
P = 90 – Q
Since there are two firms,
Q = Q₁ + Q₂
P = 90 – Q
= 90 – (Q₁ + Q₂)
= 90 – Q₁ – Q₂
STEP 2: Firm 1
TR₁ = PQ₁
ECO 1013 Individual Assignment Page 5
TR₁ = (90 – Q₁ – Q₂) x Q₁
TR₁ = 90Q₁ – Q₁² – Q₁Q₂
MR₁ = dTR₁/dQ₁
= 90 – 2Q₁ – Q₂
By symmetry, Q₁ = Q₂
MR₁ = 90 – 2Q₁ – Q₁
MR₁ = 90 – 3Q₁
STEP 3: Profit Maximization
MR₁ = MC
By symmetry, Q₁ = Q₂
90 – 3Q₁ = 10
– 3Q₁ = – 80
Q₁ = 26.67
Q₂ = Q₁ = 26.67
Industry output Q = Q₁ + Q₂
= 26.67 + 26.67
= 53.3 units
(ii) When Q = 53
Q = 90 – P
P = 90 – 53
ECO 1013 Individual Assignment Page 6
P = RM37
(iii) When P = RM37
Profit = TR – TC
= (37 x 53) – (10 x 53)
= RM1431
ECO 1013 Individual Assignment Page 7
