答题---Section A (30% of total mark) 1. Provide short definitions or descriptions for TWO of the four options below. 15 marks per part. a) Substitutes. b) A natural monopoly. c) A public good. d) Giffen and Veblen goods. 11 **Question:** 3. Lufbat, a manufacturer of cricket bats, has a linear inverse demand curve of P=220-8Q, where P is the price it can charge in pounds and Q is sales in thousands of bats. The marginal cost of producing a bat is £100. a) Copy the following table for Lufbat's sales and profits and fill in the missing columns **Table:** | No of bats 000s | Price | Total Revenue | Marginal Revenue | Marginal cost | Variable cost | Profit before fixed cost | |-----------------|-------|---------------|------------------|---------------|---------------|--------------------------| | 0 | 220 | 0 | | | | | | 1 | 212 | 212 | | | | | | 2 | 204 | 408 | | | | | | 3 | 196 | 588 | | | | | | 4 | 188 | 752 | | | | | | 5 | 180 | 900 | | | | | | 6 | 172 | 1032 | | | | | | 7 | 164 | 1148 | | | | | | 8 | 156 | 1248 | | | | | | 9 | 148 | 1332 | | | | | | 10 | 140 | 1400 | | | | | | 11 | 132 | 1452 | | | | | | 12 | 124 | 1488 | | | | | | 13 | 116 | 1508 | | | | | b) What is the profit-maximising level of output for Lufbat? c) Lufbat has invested in a factory with a fixed cost of £500,000. Outline its decision whether or not to produce in i) the short run and ii) the long run. d) How would the firm's decision on whether to stay open be affected, if the government were to subsidise the production of cricket bats by £20 per bat? **Question 4:** Explain, with examples, what economists mean by a) opportunity cost and b) economic profit. Why might the profit statement in a firm's annual report differ from its economic profits? **Question 5:** Consider two leisure industries of your choice. Using concepts from the economics of market structure, compare and contrast the market structure of the two industries, and discuss what may cause them to be how they are.