Microeconomics Answers

Sita expects her future earnings to be worth Rs. 100. If she falls ill, her expected future
earning will be Rs 25. There is a belief that she may fall ill with probability of 

while
the probability of remaining in good health is

. Let her utility function be given as U(y) =



. suppose that an insurance company offers to fully insure sita against loss of earnings
caused by illness against an actuarially fair premium.
(a) Will Sita accepts the insurance. Explain.
(b) What is the maximum amount that Sita would pay for the insurance?

In a particular town there are 100 cars and 50 motorcycles. Each car owner has a demand curve for petrol given by: Qdc = 20 – 5p for p ≤ 4 and Qdc = 0 for p > 4. Each motorcycle owner has the following demand function for petrol: Qdm = 15 – 3p for p ≤ 5 and Qdm = 0 for p > 5. Prices are expressed as SR per gallon, and quantities as gallons per week.
a) If the price is SR 3, now many gallons of petrol per week are bought by (i) each car owner and (ii) each motorcycle owner?

b) Sketch the market demand curve for petrol (that is, the combined demand from car and motorcycle owners).


c) Write an algebraic expression for the market demand function.

Suppose Sarah opens a lemonade stand. She hires Aisha and Sadeem for $12 a week ($6 each). She “rents” pitchers and spoons from her friend mother for $5 a week and spend $20 a week on paper cups, lemons, sugar, and other materials. Before she opened the stand, she was earning $15 a week selling newspapers. She grosses $72 in revenues a week from lemonade sales. Calculate accounting costs, economic costs, accounting profit, and economic profit. Evaluate how Sarah’s lemonade business is doing.

Consider the continuous decline in oil price that has hit most of the oil producing economy across the globe, and members of Organization of Petroleum Exporting Countries (OPEC) will be having their meeting by 15th December 2016. As an economic expert, kindly advice OPEC on what needs to be done in order to reverse the continuous decrease in oil price (Note: Support your answer with the required graph)?

The supply and demand equations for strawberries are given by: Qs= -10+5P Qd= 20-5P
a.What is the equilibrium market price and quantity for strawberries in this market?
b.Calculate the price elasticity of demand and price elasticity of supply at the equilibrium price.

Explain the concept of income elasticity of demand. How is it used to identify normal goods, luxuries, necessities, and inferior goods? Be as specific and logical as possible.

Compute the price elasticity of demand if price increases from $10 to $12 and quantity demanded falls from 600 to 400. Use the value obtained and a specific example to determine whether price must be increased or decreased to increase total revenue. Explain why. Note: Explain only how to increase total revenue, not decrease it.

There are questions and answers. I want to know explanation how to get this answers. Thant you:)
This is it;
[Situation]
-The home country is currently in its LR eq'm with:
P=1, M1s=1, G1=T1=0, Y1=Ypotential
-Foreign variables: i*=2(%), P*=1
-Assume that the IS curve is a straight line, and that its slope is preserved.
-MPC=0.75
-Investment depends negatively on i.
-TB=-0.25xY+0.5x(EP*/P)
-Money demand: Md=Px(Y-i)
-The initial IS curve labelled IS1 is shown in the handout.
-In the LR:
1) PPP holds, and
2) the expected ER is equal to the spot ER.

Q. Given the initial values of P=1 and M1s=1, find the equation of the initial LM1 curve.
A. i=Y-1

Q. Using the initial IS1 curve in the handout and the LM1 curve obtained in Q1, find the values of (Y,i) in the initial eq'm .
A. (3,2)

Q. Given the "Equilibrium1", find the values of (i, E, Ee) in the corresponding initial eq'm in the FX market.
A. (2,1,1)

Its about microeconomics questions. There are questions and answers(TRUE OR FALSE). I want to know explanation how the answers come out. Thank you.
This is it;
Q. Pricing-to-market behavior is one reason for the J-curve effect.
A. False

Q. Multi-level distribution channels tend to make the depreciation of home currency more effective in improving trade balance.
A. False

Harvey Habit has a utility function U(c1, c2) = min{c1, c2}, where c1 and c2 are his consumption in periods 1 and 2 respective ly. Harvey earns $189 in period 1 and he will earn $63 in period 2. Harvey can borrow or lend at an interest rate of 10%. There is no inflation.