Economics of Enterprise Answers

you are provided with the following:
Marginal propensity to save (MPS) =0.2
Tax rate (t) =0.2
Autonomous saving=-50
investment spending (I) =100
Government expenditure (G) =150
exports(X) =120
autonomous imports=30
marginal propensity to import (m)= 0.15
Answer the following question:
(a) derive the consumption equation from the information given.
(b) calculate the equilibrium level of income using the AD=AS approach.
(c) calculate the equilibrium level of income using the injection = withdrawals (J=W) approach.
(d) calculate the fiscal surplus (or deficit) at the equilibrium level of income.
(e) calculate the value of net export at the equilibrium level of income.
(f) what would the level of income have to be net exports are zero?
(g) what is the value of the multiplier in an economy:
i. consisting only of households and businesses (no government or foreign sectors)
ii. consisting of households, businesses and the government (but no foreign sector)
iii consisting of both C,I,G and foreign sector

Explain what are the advantages and disadvantages of socialism and communism?

If supply is price inelastic, the value of the price elasticity of supply must be....

Consider the following payoff matrix:

player B strategy
1 2
1000$ - 2000
player A strategy 1 2000$ -1000
-1000$ 2000
2 -2000 1000


a. Does Player A have a dominant strategy? Explain why or why not.

b. Does Player B have a dominant strategy? Explain why or why not

Calculate the marginal income if 32 units were to be sold.

PPC’s APPLICATION ASSIGNMENT: page 25, # 11

a) Draw a production possibilities curve for this agricultural enterprise.

b) Can this farmland produce 6000 bushels of corn and 1500 kg of beef during the same year? Mark this production level as point H on your graph. Explain what must happen in order for this enterprise to reach this level of production.

c) What is the opportunity cost of expanding beef production from 900 kg to 1200 kg?

d) What is the opportunity cost of expanding corn production from Level B to Level A?

e) If a decision is made to produce 5000 bushels of corn, how much beef can be produced on this farm at the same time? Mark this production level as point K on your graph.

f) Given this set of production possibilities, should this enterprise specialize (in either corn or beef production) or produce ample quantities of both products? Justify your decision,

Explain the concept of marginal rate of substitution and marginal rate of transformation. And show these concepts graphically?

2a. Howard Bowen is a large-scale cotton farmer. The land and machinery he owns has a current market value of $4 million. Bowen owes his local bank $3 million. Last year Bowen sold $5 million worth of cotton. His variable operating costs were $4.5 million; a
ccounting depreciation was $40,000, although the actual decline in value of Bowen’s
machinery was $60,000 last year. Bowen paid himself a salary of $50,000, which is not considered part of his variable operating costs. Interest on his bank loan was $400,000. If Bowen worked for another farmer or a local manufacturer, his annual income would be about $30,000. Bowen can invest any funds that would be derived, if the farm were sold, to earn 10 percent annually. (Ignore taxes.)
a. Compute Bowen’s accounting profits

b. compute bowen's economic profits.

Given market equilibrium of demand and supply of sugar, what happens to the level of equilibrium price and quantity if market demand increases by 50% while its supply increases by 40%?

Quantity production (Q) 0 1 2 3 4 5 6
Total cost 8 16 18 28 45 63 72
Avc (average variable cost)
Ac (average cost)
Mc (marginal cost)

A )calculate fixed cot of production
B ) fill the above table
C ) calculate average variable cost of the 2nd product