Microeconomics Answers

Questions: 11 788

Answers by our Experts: 11 490

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Search & Filtering

Consider the PPF for clean air and automobile travel.




a. Explain why unregulated air pollution in automobiles would push a country inside its



PPF. Illustrate your discussion with a carefully drawn PPF for these two goods.




b. Next explain how putting a price on harmful automobile emissions would increase both



goods and move the country to its PPF. Illustrate by showing how correcting the “market



failure” would change the final outcome.



Step-by-step solution

Given the Following output schedule of a firm, calculate its marginal cost at different levels of output.


Units of Fixed Input-2

Units of Variable input - 0,1,2,3,4,5

Total output-0,10,25,50,65,70


Further, the price of fixed input is Rs. 200 per unit. And the price of a variable input is Rs. 100 per unit.


Assume that maize is a normal good. If the price of maize rises, then the substitution effect results in the person buying … of the good, and the income effect results in the person buying … of the good.

1. 

more, more

2. 

more, less

3. 

less, more

4. 

less, less


The sum of consumer and producer surplus is a measure of the economic well-being of a society.

Select one:

True

False



If the cost of producing an inferior product rises, and people’s incomes increase at the same time, the equilibrium price will …

1. 

decrease.

2. 

increase.

3. 

stay the same.

4. 

be indeterminate.


Use a graph to explain how the equimarginal principle can be applied to minimise production costs

for the following pair of equations determine algebraically the equilibrium price and output Q=6-p, QS=3P-2


Draw a demand curve for MP3 downloads. In your diagram, show a price of MP3 downloads per tune and the consumer surplus that results from that price. Explain in words what this consumer surplus measures.

Draw a supply curve for MP3 downloads. In your diagram show a price of MP3 downloads and the producer surplus that results from that price. Explain in words what this producer surplus measures.

The cost of producing Blu-ray DVD players has fallen over the past few years. Let’s consider some implications of this fact.

a. Use a supply-and-demand diagram to show the effect of falling production costs on the price and quantity of Blu-ray DVD players sold.

b. In your diagram, show what happens to consumer surplus and producer surplus.

c. Suppose the supply of Blu-ray DVD players is very price elastic. Who benefits most from falling production costs – consumers or producers of Blu-ray DVD players?

Healthy Harry’s Juice Bar has the following cost schedules:

Q (VATS)

VARIABLE COST

TOTAL COST


$ 0

$ 30

1

10

40

2

25

55

3

45

75

4

70

100

5

100

130

6

135

165

a. Calculate average variable cost, average total cost, and marginal cost for each quantity.

b. Graph all three curves. What is the relationship between the marginal-cost curve and the average total- cost curve? Between the marginal-cost curve and the average-variable-cost curve? Explain.