f Muthusamy is the General Manager of Alibaba Teak Factory a

(f) Muthusamy is the General Manager of Alibaba Teak Factory and earning an annual salary of RM80,000. He decides to open his own teak factory. His annual expenses will include RM225,000 for overhead costs and RM50,000 for material costs. Muthusamy will cover his start-up expenses by cashing in his personal fixed deposits of RM120,000 on which he was earning annual interest of RM3,500. Based on these basic information, estimate Muthusamy\'s accounting and economic revenue if he wants to yield at least RM50,000 in profits. (6 marks) Question 3 (20 marks) a) How the size of an oligopoly affects the market outcome? Explain with the output effect and the price effect. (5 marks) b) Evaluate the following statement: “Under conditions of imperfect competition, market price is not determined by demand and supply.” What does it mean when economists say “monopolists do not have supply curves?\" Show your answer graphically. (10 marks) c) Why is a monopolistically competitive industry said to be economically inefficient? (5 marks)

Solution

F.

Annual expenses = overhead cost + material cost = 225000+50000 = RM 275000

If profit = RM 50000

Then,

Accounting revenue = Profit + explicit cost = profit + annual expenses = 50000 + 275000

Accounting revenue = RM 325000

If profit = RM 50000

Then,

Economic revenue = Profit + explicit cost + implicit cost = 50000 + 275000 + 80000 + 3500

Economic revenue = RM 408500

Pl. repost other unanswered questions for their proper answers!