Microeconomics Answers

1. Flowers are one of the most common gifts to give on Valentine's Day, a celebration that occurs every year on the 14th of February. A flower shop knows that in the past, because of the high demand for flowers on this day, it could sell 50 bouquets of flowers for $119.50 each. This year, on Valentine's Day, the flower shop decides to increase the price of the bouquets to $129.50 and sells 48 bouquets.

Which of the following statements are true (to four decimal places):

The point price elasticity of demand for the bouquets at a price of $119.50 is 0.4780.

The point price elasticity of demand for the bouquets at a price of $119.50 is 11.9500.

The point price elasticity of demand for the bouquets at a price of $119.50 is 0.0837.

A 1% decrease in the price of bouquets would lead to a 0.4780% increase in the quantity of bouquets demanded.

1. The Brisbane Entertainment Centre is a performance venue, which hosts popular musicians from around the world. It has a maximum seating capacity of 13,500 people. In 2015, an artist priced their performance at a price of $50 per ticket and the show was completely sold out. The next year the same performer decided to increase the price to $100 per ticket but this time only 12,000 tickets were sold.
1. The point elasticity of demand at a price of $50 is 0.07% (rounded to two decimal places).
2. A 1% increase in the price of a ticket leads to a 0.11% (rounded to two decimal places) decrease in quantity demanded.
3. A 1% increase in price leads to a 0.07% (rounded to two decimal places) increase in quantity demanded.
Which of the above statements are true:

Only 1 is true.

Only 2 is true.

Both 1 and 2 are true.

Both 2 and 3 are true.

All three are true.

(b) Initially, both Australia and the US spent half a day producing ethanol and half a day producing wheat. However, they now decide to specialise in producing the product that they have a comparative advantage and trade their products in the world market. What are the total gains from trade?

Discuss the main inputs under three main types of factors of production

Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smart phones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With an annual overhead costs and operating expenses amounting to $145000. Jamie expects a profit of 20 percent. This margin is 5 percent larger than of her largest competitors, Apps. Inc.

a. If Jamie decides to embark on her new venture, what will her accounting cost be during the first year of operation? Her implicit costs? Her opportunity cost?

b. Suppose that Jamie’s estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn positive accounting profits? positive economic profit?

Consider a representative consumer who is allocating her budget between housing and clothes. Her utility function is = . where is housing and is clothing. The price of housing is equal to 5 and the price of clothing is equal to 1. Initially the consumer starts out with a total budget M = 10.

A. Please state the consumers budget constraint.

B. Please find the consumers marginal utility of housing (MU#$) and his marginal utility of
clothing (MU%&)

C. Find the optimal consumption bundle of clothing and housing. Please show all the steps of your calculation (hint: use the condition ’()$ = ’()&).
*$ *&

D. Please find the optimal consumption bundle if the consumer total budget is 50

E. Use your answers from above to sketch the Engel curve for housing and clothing.

F. Is housing a normal or an inferior good for the representative consumer (base your answer on the Engel curve).

why is the following true?

If an increase in the supply of good A decreases the demand for good B, then good A and good b are substitutes.

Explain what will happen to consumer and producer surplus and deadweight loss if the government imposes a tax on sellers for each radio they produce in order to raise government income? Include in your answer an explanation of the three concepts – consumer surplus, producer surplus and deadweight loss.

As I really think your comment is very helpful, I was wondering whether you could help me with my current challenge:
Demand: Q = 200 – 5P.
Government protection: 20% tax on imported automobiles (your only competitors) and a $10 subsidy for every unit sold. It is assumed that every unit produced will sell, though the price will adjust until the point where the market will clear.
The cost curve for your organization is TC = 20 + 2Q.

How can I derive a supply function from these inputs? Is there a way?
To maximise revenue is it enough to just say MR = 40 - 0.4Q = 0?
What is the net effect of the subsidy provided by the government at the profit-maximising output?

(Urgent) Assume that the price in autarky for a product is 50. The world price is 30 and at this price local supply is 100000 and local demand is 200000. The local government imposes a tariff of 5, increasing the price to 35. At this new price, local supply is 120000 and local demand is 170000. Provide numbers for the following with explanation.

a) Change in consumer surplus (calculated how)
b)Change in producer surplus (calculated how)
c) Change in total welfare (calculated how)
d) if for each 2000 units of local production 5 jobs are created how much does the creation of each job cost to society?
e) would results change if the local government chose a quota instead of tariff, how much would the equivalent quota be?
Please provide solution with explanation that how you calculated everything and with graph.