Microeconomics Answers

TC=250+60Q-3Q2+0.10Q3 W-where TC is total cost and Q is quantity of output produced.

a)Write an algebraic expressions for the Average Total Cost ?
b)Determine the output level where AVC costs are minimized ?
c)Determine the output level where marginal cost are minimized ?

a. Suppose X ( bread ) and Y ( eggs) are two goods that the prices are given and there is a consumer with R ( Income)
i. Illustrate using a diagram how it is possible to split the effects of the price
reduction on good X into income and substitution effects if both goods are
normal goods.
ii. Illustrate using the diagram how it is possible to split the effect of the reduction
of the price of both goods
iii. Illustrate using a graph the effect of the increase in the price of one item and
then the increase in the income level of the consumer.

The market for gasoline is in equilibrium. OPEC, one of the principal producers (with the power to displace the supply curve) decides to increase the size of the revenue of its members by increasing the supply. Assuming the supply of gasoline is fairly inelastic, analyze ( graphically, with comments on the results that you acquire) how this decision will decision will affect the total revenue of the gasoline producers if:
i. Demand for gasoline is perfectly elastic
ii. Demand for gasoline is perfectly inelastic
iii. Demand for gasoline is unit elastic

Before trade, the domestic equilibrium price of sugar in Zimbabwe was R10 per Kg and that for South Africa R 15 per Kg. Assume South Africa only trade with Zimbabwe and the transport cost does not exist.
 Using diagrams, explain which country becomes an exporter or an importer when trade is allowed between the two countries. Identify the pre-trade consumer and producer surplus for each country.
 If free trade is permitted, illustrate the change in the surplus of consumers and producers for each country. Will each country’ total surplus increase or decrease?
 Truck drivers who cart goods across these two countries go on a short strike Analyze how this strike may affect the free trade consumer and producer surplus enjoyed by both countries

There are only two travel agencies, A and B, offering Brazil World Cup 2014 Vacation Packages (flight, hotel accomodation, game tickets and group excursion). The demand fuction for Brazil World Cup 2014 Vacation Packages is given by P=10.000 - Q. The marginal cost is constant and it can be expressed by MC (=ATC)=2.000
a) The travel agencies try to coordinate their actions and set the price and quantity like a single monopolist. Once they set this profit maximizing price and quantity, they plan to split the resulting profil equally. What is the profit for each travel agency if they both adhere to the plan)
b)One of the travel agency, travel agency A, deviates from the plan and sets its price equal to BAM 4.000. What is the profit of travel agency B? (HINT: No one wants to buy overpriced goods!)
c)Both travel agencies set price equal to BAM 4.000, and then split profit equally. What is the profit for each travel agency?.

suppose you won $15 on a lotto ticket at the local 7-eleven and decided to spend all the winnings on candy bars and bags of peanuts. Candy bars cost $0.75 each while bags of peanuts cost $1.50 each.
A. Construct a table showing the alternative combinations of the two products that are available.
B. Plot the data in your table as a budget line? What is the opportunity cost of one more candy bar? Of one more bag of peanuts? Do these opportunity costs, rise, fall or remain constant as additional units are purchased?
C. Does the budget line tell you which of the available combinations of candy bars and bags of peanuts to buy?
D. Suppose that you had won $30 on your ticket, not $15. Show the $30 budget line in your diagram. Has the number of available combinations increased or decreased?

What does it mean to be broke

Explain ppc is downward sloping with increasing slop?

If Eskom (assumed sole supplier of electricity) is earning economic profits in the short run. Explain using a well labelled diagram how much output Eskom will produce and at what price this output will be sold if Eskom maximises profits.

Suppose that you are the managing director of a firm that supplies three goods: laptops, USB drives and external hard drives. The price elasticity of the demand for laptops is 2.0; for USB drives it is 1.00; and for external hard drives it is 0, 53. The firm is experiencing serious cash flow problems and you have to increase total revenue as soon as possible. You are in a position to set the prices for these goods. What would be your pricing strategy for each product? Motivate your decisions. [10 marks]