Microeconomics Answers

Suppose tha a consumer’s utility function is U(x,y)= . The price of x goods Px and the price of y goods is Py with both prices positive. The consumer has income M.

(1) Draw the indifference curve and the budget line.

(2) How much x goods and y goods does this consumer pick out to maximize his utility(It is called the consumer equilibrium point) when M=100, Px=10 and Py=5

(3) Derive the individual demand curve.

(4) Is the relation between the two goods, x and y, substitute goods or complimentary goods or independent goods?

(5) Calculate the price elasticity of each goods, the income elasticity of each goods and cross elasticity between two goods?

(6) Based on this indifference curve and budget line, Explain the substitution effect and the income effect when the price of x goods increases.

Explain why a monopoly may not always have a higher price and lower output than perfect competition?

A highly competitive market is made up of 100 identical firms. Each firm has a short-run

marginal cost function as follows:

MC = 10 + Q,

where Q represents units of output per unit of time. The firm's average variable cost curve

intersects the marginal cost at a vertical distance of 10 above the horizontal axis.

a. Determine the market short-run supply curve.

b. Calculate the price that would make 2,000 units forthcoming per time period.

How do think the development of other copying machines affected the elasticity of demand for Xerox machines?

. Suppose that the government reduces the tariff on imported coffee, and at the same time, the Health Ministry of publishes a reputable study indicating that coffee drinkers have lower rates of colon cancer. What will the combined impact be on the equilibrium price and quantity of coffee? Explain your reasoning and show it graphically

2. Consider the general demand function: Qd=710 −25P+0.25M−14PR a. Derive the equation for the demand function when M = $50,000 and PR = $15. b. Interpret the intercept and slope parameters of the demand function derived in part a. c. Sketch a graph of the demand function in part a. Where does the demand function intersect the quantity-demanded axis? Where does it intersect the price axis? d. Using the demand function from part a, calculate the quantity demanded when the price of the good is $250 and when the price is $300. e. Derive the inverse of the demand function in part a. Using the inverse demand function, calculate the demand price for 7,000 units of the good. Give an interpretation of this demand price.

Elaborate on the various economies and diseconomies of scale. Find articles with companies expanding or restructuring due to economies and diseconomies of scale.