ECS2606 ASSIGNMENT 1
SEMESTER 2 - 2023
DUE Friday, 11 August 2023, Morning
2023
ECS2606
ASSIGNMENT 1
SEMESTER 2 - 2023
, Environmental Economics
ECS2606
Assignment 1
Second Semester
2023
QUESTION 1
An industry supply curve can be derived under competitive conditions, where each
firm receives the same output price. Considering this fact, what is the relationship of
this procedure to the equimarginal principle? [5]
An industry supply curve can be derived under competitive conditions, where each
firm receives the same output price. Considering this fact, what is the relationship of
this procedure to the equimarginal principle? [5]
The equimarginal principle is a fundamental concept in economics that states that
resources should be allocated in such a way that the marginal benefit derived from
the last unit of resource used in each activity is the same. In other words, the
marginal benefit per unit of resource should be equal across all activities.
When it comes to the industry supply curve under competitive conditions, the
equimarginal principle plays a crucial role:
Individual Firm's Supply Curve
Under competitive conditions, each firm will produce a quantity of output where its
marginal cost (MC) equals the market price (P). This is because the firm will increase
its production as long as the price it receives for an additional unit of output (marginal
revenue) exceeds the cost of producing that additional unit (marginal cost). The firm's
supply curve is essentially its marginal cost curve above the minimum of its average
variable cost.
Industry Supply Curve
The industry supply curve is derived by horizontally summing the supply curves of all
SEMESTER 2 - 2023
DUE Friday, 11 August 2023, Morning
2023
ECS2606
ASSIGNMENT 1
SEMESTER 2 - 2023
, Environmental Economics
ECS2606
Assignment 1
Second Semester
2023
QUESTION 1
An industry supply curve can be derived under competitive conditions, where each
firm receives the same output price. Considering this fact, what is the relationship of
this procedure to the equimarginal principle? [5]
An industry supply curve can be derived under competitive conditions, where each
firm receives the same output price. Considering this fact, what is the relationship of
this procedure to the equimarginal principle? [5]
The equimarginal principle is a fundamental concept in economics that states that
resources should be allocated in such a way that the marginal benefit derived from
the last unit of resource used in each activity is the same. In other words, the
marginal benefit per unit of resource should be equal across all activities.
When it comes to the industry supply curve under competitive conditions, the
equimarginal principle plays a crucial role:
Individual Firm's Supply Curve
Under competitive conditions, each firm will produce a quantity of output where its
marginal cost (MC) equals the market price (P). This is because the firm will increase
its production as long as the price it receives for an additional unit of output (marginal
revenue) exceeds the cost of producing that additional unit (marginal cost). The firm's
supply curve is essentially its marginal cost curve above the minimum of its average
variable cost.
Industry Supply Curve
The industry supply curve is derived by horizontally summing the supply curves of all
