Microeconomics Answers

A natural monopoly is most likely to occur in which of the following industries?

Two Canadian workers, Adam and Karina, can each produce stoves or coffee. Adam can produce either 50 kg of coffee or 1 stove per month. Karina can produce either 160 kg of coffee or 1 stove per month.

Note: Please be sure to be as accurate as possible and to round your answers to two decimal places.


a) Plot Canada's production possibilities curve by plotting at least 3 points on the curve.
Vertical (Coffee): 0-40-80-120-...
Horizontal (Stoves): 0-0.5-1-...

b) How much of each good is produced if each worker specializes according to comparative advantage?

Stoves = ?
Coffee = ?

Assume two consumers A and B have the same utility function U= x1.x2. Prices are p1=2 , p2=5 ,income = 100 (for each) initial endowments are given as Wa= (30,8) and Wb=(25, 10) . Derive excess demand

1. using properly labelled diagrams illustrate what will happen to the equilibrium price and quantity of muesli (ceteris paribus) in the following scenarios
1. research has shown that muesli is good for the heart.
2. the ongoing drought has affected grain(one of the ingredients for muesli) production
3 Discuss any 3 factors that can cause an increase in the demand for muesli

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 demand for laptops is 2.0; for USB drives it is 1,00; and external 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 price for these goods.what would be your pricing strategy for each product? motivate your decisions.

Blue Kashmir Sapphires is generally believed to be a relatively rare gemstone. Use demand and supply curves to illustrate and explain why such a rare item is sold at such a high price. (10)

Using a well-illustrated diagram, show that a monopolist can make losses in the short-run even when MC = MR (10 marks)

Are all government produced goods public goods?

Discuss two reasons why a government sets a maximum price

An increase in quantity demand caused no change in the equilibrium price. Thus, demand must be
A) elastic. B) inelastic. C) perfectly elastic. D) perfectly inelastic.

The answer is C, can someone briefly explain to me why?