Microeconomics Answers

Fence Right is a firm that supplies and installs fence. Its output follows the production function
Q = 20L – 0.5L2; where L denotes labour hours and Q the length of the fence in feet. The firm hires labour at a wage of $25 per hour.
Hint: MRPL = MRC
a. DD has received an offer to install 200 feet of fence for a price of $480. Should DD accept the offer?

b. What offer would be profitable if the company desires a price of $5 per foot of fence installed (show all workings)?

Which of the following is true when comparing general ag price supports (when government purchases the surplus) vs ag deficiency payments.

a) Because govt purchases the surplus under ag price support policy, the quantity demanded will decrease.
b) Deficiency payments result in higher consumer prices.
c) Ag price supports reduce producer surplus (PS).
d) Deficiency payments result in lower consumer price for the product.

In the long run a company that produces and sells popcorn incurs total costs of $1,050 when output is 90 canisters and $1,200 when output is 120 canisters. The popcorn company exhibits

What effect would each of the following have on the value of the firm?
(a) A new competitor enters the market.
(b) The production department achieves a technological breakthrough, which reduces
production cost.
(c) The firm is required to install pollution-control equipment.
(d) The work force votes to unionize.

Describe the taxi market in London (competition, etcetera) in the
context of the changes taking place.

These two articles give you a picture of what the taxis in London:
BBC news: http://www.bbc.co.uk/news/technology-29740296
The Guardian: http://www.theguardian.com/technology/2014/dec/05/black-cabs-end-ofthe-road-uber
This page is on news articles on transport in
England: http://www.theguardian.com/politics/transport

Given your answer for question 1, would you expect economics profits in the industry?
a. Explain
i. Identify some of the barriers to entry and exit (if any) that may
exist in the market?

REFER TO THIS BELOW: http://www.theguardian.com/business/interactive/2010/jan/20/cadbury-kraftnestle-mars-ferrero

Given the rising price of Cocoa and sugar, Mars cut down the size of Snicker bars. Given your answer for question number 1, what would you predict will
happen?
a. Explain

REFER TO THIS BELOW: http://www.theguardian.com/business/interactive/2010/jan/20/cadbury-kraftnestle-mars-ferrero

A storm destroys half the banana crop. Is this event more likely to hurt banana farmers if the demand for bananas is very elastic or very inelastic?

Suppose that Omar’s marginal utility for cups of coffee is constant at 3.5 utils per cup no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 11 for the first doughnut he eats, 10 for the second he eats, 9 for the third he eats, and so on (that is, declining by 1 util per additional doughnut). In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on doughnuts, coffee, or both. How big would that budget have to be before he would spend a dollar buying a first cup of coffee?

what are the limitation and strength of neoclassical theory in understanding the behavior of a firm.