Economics of Enterprise Answers

1. Rank the following proposals in terms of their ability to increase the equilibrium level of income :
a- Government spending and taxes increase by x
b- Government spending and taxes decrease by x
c- Government spending increase by x
d- Taxes increase by x
2. Suppose that MPC = 0.9 and MP to import = 0.10 and an autonomous increase in Exports = $10 . Calculate :
a. The level of the multiplier
b. The change in the level of imports
( Hint : k = 1 / 1- MPC + MPM )

Consider a monopolist with the following demand functions for different market segments q1=16-0.2P1
q2=9-0.5P2
Where q1 and q2 are the quantities demanded in markets 1 and 2 respectively, and p1 and p2 are the prices charged in the two market s. The cost function is C=50+20 (q1+ q2).

Pakistan cement industry has shown very fast progress in last few years and has
become a leading sector of the economy. At the time of inception, there were only
four cement plants in Pakistan which has now grown to over 30 units. Cement
manufacturers have also expanded their production capacity to meet higher demand
because of construction projects and CPEC. Maple Leaf Cement Factory Limited is
a reputable largest manufacturer of cement in Pakistan. The company was set up in
1956. Suppose the quantity demanded and quantity supplied functions of cement
industry in starting week of current month are:
Qd = 5000-6P
Qs= 1500+P
Where ‘P’ is the price in rupees per bag of cement and ‘Qd’ is quantity demanded of
cement in number of bags. ‘Qs’ is quantity supplied of cement in number of bags.
Requirements:
a. Calculate the market equilibrium level of price and quantity.

What will happen if Eskom monopoly is broken

A multiple choice test awards 1 point for a correct answers and penalizes 0.25 points for an incorrect answer. If you have to make a random guess and there are five possible answers, what is the expected value of guessing?

A consumer splits their income equally between two goods. If the price of one good increase by 10% and their income increases by 5%, show that the consumer’s optimal consumption bundle will change.

Please answer a particular question with the help of graph

In the labour market for carpenters, the current market clearing wage rate is R800 per day. With the aid of a diagram, discuss the welfare effects of government intervention in the form of legislation that sets the minimum wage rate for a carpenter at R1000 per day

Problem one
Most weeks, the demand for long-stem roses can be approximated by QD = 2400 - 50p, where QD is the total quantity demanded (in dozens) at price p (per dozen). Currently, roses are supplied by 100 identical growers, each having total costs C=0.25q2+0.5q+36, where q is the number of roses (again, in dozens) supplied by the grower. The $36 cost can be avoided on a daily basis.
(a) What is the short-run supply curve for each individual grower? Describe this curve both algebraically and graphically.

Most weeks, the demand for long-stem roses can be approximated by QD = 2400 -
50p, where QD is the total quantity demanded (in dozens) at price p (per dozen).
Currently, roses are supplied by 100 identical growers, each having total costs
C=0.25q2
+0.5q+36, where q is the number of roses (again, in dozens) supplied by
the grower. The $36 cost can be avoided on a daily basis.

(a) What is the short-run supply curve for each individual grower? Describe this
curve both algebraically and graphically.

(b) Derive the short-run market supply schedule, which gives quantity supplied as a
function of price.

(c) What is the equilibrium price for a dozen roses in this market? Sketch the market
supply and market demand schedules.

(d) How many dozens of roses will be supplied by each grower?

(e) Assuming there is free entry into and exit from this market. Will there be entry or exits from this market going into the long-run? Explain your answer.

Tom is a full-time lecturer at a private higher education institution and is considering a career in carpentry. He wishes to pursue a career in carpentry (a childhood dream) which he has studied part time and is now equipped to take on clients. In his current position he earns a rate of R1000 per day and if he were to persue a career in carpentry he would earn R800 per day. Due to the flexibility of the employment conditions at the higher education institution he works for, Tom can negotiate the number of days he works at and will receive a rate of remuneration based on the number of days worked.

In the labour market for carpenters, the current market clearing wage rate is R800 per day. With the aid if a diagram, discuss the welfare effects of government intervention in the form of legislation that sets the minimum wage rate for a carpenter at R1000 per day