Macroeconomics Answers

In the national accounts:

•  A. Total production is always greater than total income.
•  B. Total production is always equal to total income.
•  C. Total production may be greater than total income.
•  D. Total production may be less than total income.
•  E. Total production is always less than total income.

A perfectly competitive firm has the cost function TC = 1000 + 2Q + 0.1 Q2. What is the lowest price at which this firm can break even?

The demand and total cost functions of a good are respectively and

Find expressions for TR, (profit) , MR, and MC in terms of Q.

Solve the equation

and hence determine the value of Q which maximizes profit.

Verify that, at the point of maximum profit, MR=MC.

Q1. A firm’s production function is , where L denotes the size of the workforce. Find the value of MPL in the case when: 

(a) L=1, (b) L=10, (c) L=100, (d) L=1000

Does the law of diminishing marginal productivity apply to this particular function?

Q2. Show that the price elasticity of demand is constant for demand functions of the form

where A and n are positive constants.

A monopolistic producer of two goods, 1 and 2, has a joint total cost function

where and denote the quantity of items of goods 1 and 2, respectively that are produced. If P1 and P2 denote the corresponding prices then the demand equations are

Using the Lagrange multiplier approach, find the maximum profit if the firm is contracted to produce a total of 15 goods of either type. Estimate the new optimal profit if the production quota rises by 1 unit.

A closed economy was observed in two different years to be operating with levels of 

output at: (a) aggregate supply was equal aggregate demand for goods and services but 

planned domestic investment was greater than planned domestic saving ( b) aggregate 

supply was equal aggregate demand for goods and service but planned domestic 

investment was less than planned domestic saving. Use a diagram to explain the forces 

that would move the economy towards a stable equilibrium in each case.

Use the information given and show in a table format how value added method is used to

Calculate GDP. 

1.     A forester chops down 200 trees and sells them @ N$50 each to the coal factory on a farm. The coal factory processes these trees into coals and sells the coal @ N$20 000 to the coal wholesaler’s. The coal wholesaler’s goes to the market and sell 500 bags of coal’s @N$100 each to pick n Pay.  Pick n Pay sells the 500 bags of coal’s @ N$150 each to its customers. According to this example, how much value added do the coals contribute to the GDP?

Determine the best level of output for the above question by the MR and MC approach.

If the federal funds rate is above the FED's target the fed should

A perfectly competitive firm has the cost function TC = 1000 +  2Q  + 0.1  Q2. What is the lowest price at which this firm can break even?