Microeconomics Answers

An economy consists of three workers, Larry, Moe, and Curly. Each works ten hours a day and can produce two services: mowing lawns and washing cars. In an hour, Larry can either mow one lawn or wash one car; Moe can either mow one lawn or wash two cars; and Curly can either mow two lawns or wash one car.
Scenario 1: All three spend all their time mowing lawns. Then lawns will be mowed and cars will be washed.
Scenario 2: All three spend all their time washing cars. Then lawns will be mowed and cars will be washed
Scenario 3: All three spend half their time on each activity. Then lawns will be mowed and cars will be washed.
Scenario 4: Larry spends half his time on each activity, while Moe only washes cars and Curly only mows lawns. Then lawns will be mowed and cars will be washed.
Exactly one of the scenarios above is inefficient. That is Scenario

Suppose that the demand function for a commodity is given as Qd = 9000 - 100P

a. derive the market demand schedule for this commodity using the various prices below. Indicate your answer on the corresponding space provided on the table. Plot the table on a graph

Price 5 10 20 30 40 52 60 70
quantity deman __ __ __ __ __ __ __ __

Explain, with the use of demand and supply diagrams, the effect of the following events on the market for solar panels. (Assume ceteris paribus for each of the event).

(a) The price of solar panels has fallen to below the market equilibrium price.
(b) The price of electricity for an average household has increased by 50 percent.
(c) New technology has increased the productivity of solar panel producers

P=40-2Q
MC=20
Q=Q1+Q2

1. Assume you are about to graduate and you have several family members that are interested in attending the ceremony. You only have 100$ to spend this month (no one will lend you any money) and you are expected to buy the tickets to graduation. So, this month you will only consume tickets, T, and a composite commodity, X.
The price of a ticket is 10 $ and you plan on buying 4 tickets (the price of the composite commodity, X, is 1 $)
But the university makes a special offer. You may join the Alumni Association for 20 $, and then you can buy tickets for 5 $ each (note that joining the Alumni Association holds absolutely no interest to you-it provides no extra utility).
Verbally and graphically explain whether you will join the Alumni Association to get the cheaper tickets. ANY SOLUTION FOR THIS

Suppose that in a year an american worker can produce 100 shirts or 20 computers, while a chinese worker can produce 100 shirts or 10 computers.
A. Graph the production possibilities curve for two countries. Suppose that without trade the workers in each country spend half their time producing each good. Identify this point in your graph.

3. Nagehan derives a utility from consuming Caviar (C) and Champagne (W). Her utility function is given as
U= U(C,W) = 5C2/3W1/3
The price of a tin of caviar (Pc) is 50 YTL, while the price of a bottle of champagne (Pw) is 8 YTL.
a. Determine the quantities of caviar and champagne Nagehan must purchase in order to receive a utility level of 200.
b. Determine the minimum expenditure Nagehan must make in order to achieve a level of utility equal to 200.
c. Compute the value of µ* for this problem and interpret its value as it specifically applies to Nagehan.
d. Determine how changes in income (M) will affect Nagehan’s demand for caviar.
e. Determine how changes in price of a tin of caviar (Pc) will affect Nagehan’s demand for caviar and graphically derive the demand curve for caviar.

II. Answer the following Problems (20 Points each)
1. Assume you are about to graduate and you have several family members that are interested in attending the ceremony. You only have 100TL to spend this month (no one will lend you any money) and you are expected to buy the tickets to graduation. So, this month you will only consume tickets, T, and a composite commodity, X.
The price of a ticket is 10 TL and you plan on buying 4 tickets (the price of the composite commodity, X, is 1 TL)
But the university makes a special offer. You may join the Alumni Association for 20 TL, and then you can buy tickets for 5 TL each (note that joining the Alumni Association holds absolutely no interest to you-it provides no extra utility).
Verbally and graphically explain whether you will join the Alumni Association to get the cheaper tickets.

Discuss if the economic analysis of a rational consumer estimating demand based on utility for standard products also valid for poor quality and luxury goods?

1. Assume you are about to graduate and you have several family members that are interested in attending the ceremony. You only have 100TL to spend this month (no one will lend you any money) and you are expected to buy the tickets to graduation. So, this month you will only consume tickets, T, and a composite commodity, X.
The price of a ticket is 10 TL and you plan on buying 4 tickets (the price of the composite commodity, X, is 1 TL)
But the university makes a special offer. You may join the Alumni Association for 20 TL, and then you can buy tickets for 5 TL each (note that joining the Alumni Association holds absolutely no interest to you-it provides no extra utility).
Verbally and graphically explain whether you will join the Alumni Association to get the cheaper ticket.