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Microeconomics
Justo & Company use third-degree price discrimination in selling its product. The demand
equations for the two markets are as follows:
Market 1 P1 = 2.46 - 0.2Q1
Market 2 P2 = 4.54 - 0.8Q2
The marginal cost is $1.20
a. Determine the profit maximizing price and quantity in each market.
equations for the two markets are as follows:
Market 1 P1 = 2.46 - 0.2Q1
Market 2 P2 = 4.54 - 0.8Q2
The marginal cost is $1.20
a. Determine the profit maximizing price and quantity in each market.
Microeconomics
Maximizing profits from cost function of C=50 + 4Q^2 with price of $40
Microeconomics
Why is price mechanism said to be an institution of exchange?
Microeconomics
5
Assume, in an industry where there are no barriers to entry and firms are making an economic loss in the short run.
a) What options are available to firms in the short run to minimise their losses.
b) Using demand and supply analysis together with the cost curves, explain why the actions to minimise loss lead to firms’ making normal profit in the long run?
6
In a market structure where firms are mutually interdependent, price competition is not common. Explain using the game theory matrix, with relevant assumptions, how firms make decisions when they behave collusively and non-collusively. In the absence of price competition, how do firms maintain or increase their market share?
Assume, in an industry where there are no barriers to entry and firms are making an economic loss in the short run.
a) What options are available to firms in the short run to minimise their losses.
b) Using demand and supply analysis together with the cost curves, explain why the actions to minimise loss lead to firms’ making normal profit in the long run?
6
In a market structure where firms are mutually interdependent, price competition is not common. Explain using the game theory matrix, with relevant assumptions, how firms make decisions when they behave collusively and non-collusively. In the absence of price competition, how do firms maintain or increase their market share?
Microeconomics
3
The outbreak of Bird Flu in 1997 resulted in the Hong Kong government ordering the culling of more than 1.5 million chickens. The culling of chickens was simultaneously accompanied by consumers reducing their demand for life chickens due to the bird flu. Using demand and supply analysis, what was the impact on price and quantity in the market for life chickens?
4
Assume the price of a good increase from $6 to $8, leading to a fall in quantity demanded from 50 to 40 units. Calculate the price elasticity of demand for the good at this price range and explain how total revenue will be impacted by the increase in price?
The outbreak of Bird Flu in 1997 resulted in the Hong Kong government ordering the culling of more than 1.5 million chickens. The culling of chickens was simultaneously accompanied by consumers reducing their demand for life chickens due to the bird flu. Using demand and supply analysis, what was the impact on price and quantity in the market for life chickens?
4
Assume the price of a good increase from $6 to $8, leading to a fall in quantity demanded from 50 to 40 units. Calculate the price elasticity of demand for the good at this price range and explain how total revenue will be impacted by the increase in price?
Microeconomics
Explain, with the use of demand and supply diagrams, the effect of the following events on the market for solar panels:
(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.
QUESTION 2
Ceteris paribus, at the same time when demand for yoga services have increased the government has introduced strict regulations on yoga providers, resulting in the decrease in the number of yoga providers. Using demand and supply analysis what will be the impact on price and quantity in the market for yoga services.
(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.
QUESTION 2
Ceteris paribus, at the same time when demand for yoga services have increased the government has introduced strict regulations on yoga providers, resulting in the decrease in the number of yoga providers. Using demand and supply analysis what will be the impact on price and quantity in the market for yoga services.
Microeconomics
U=x2 x Y Indicate whether each of the following transformations are monotonic transformations of U.
a)10x2 x y
b)2lnX x lnY
c)x2/3 x y1/3
d) 2X + Y
a)10x2 x y
b)2lnX x lnY
c)x2/3 x y1/3
d) 2X + Y
Microeconomics
Use indifference and budget constraint diagram (one diagram for each case) illustrate and explain (suppose the two goods are neither perfect substitutes nor perfect complements):
(1) A consumer spends all his income on bread and juice. As the price of bread decreases, he now buys more of both bread and juice.
(2) A consumer spends all his income on honey and electronic games. As his income increases, he now buys more electronic games and less honey.
(3) A consumer spends all his income on books and drinks. As the prices of both books and drinks double, he now buys less of both goods.
(4) A consumer spends all his income on books and drinks. As his income is cut in half (50% of original level), he now buys less of both goods.
(1) A consumer spends all his income on bread and juice. As the price of bread decreases, he now buys more of both bread and juice.
(2) A consumer spends all his income on honey and electronic games. As his income increases, he now buys more electronic games and less honey.
(3) A consumer spends all his income on books and drinks. As the prices of both books and drinks double, he now buys less of both goods.
(4) A consumer spends all his income on books and drinks. As his income is cut in half (50% of original level), he now buys less of both goods.
Microeconomics
Suppose the initial price of apples is $1 per lb. and the price of orange is $2 per lb. A typical consumer has income $10 and spends all his income on the two goods. The consumer buys 4 lbs of apples at the initial price levels. Later the price of apples increases to $2 per lb and the price of orange remains unchanged, and the consumer buys 3 lbs apples. Based on indifference/budget constraint knowledge, derive the demand curve for apples. Make sure you label all the prices and quantities carefully. (Hint: calculate the quantities demanded for oranges in the 2 circumstances first.)
Microeconomics
1. An economy produces only agricultural products (x) and manufactured goods (y). A quarter of
the land in the country is arid and not suitable for agricultural products. Therefore, if half of the
arid land is not used at all:
(a) The economy could be productively efficient when the opportunity cost of x (agricultural
products) is infinite;
(b) The economy could be productively efficient when the opportunity cost of y (manufactured
goods) is zero;
(c) The economy could be productively inefficient with infinite opportunity cost for the
production of x (agricultural products);
(d) The economy could be productively inefficient with infinite opportunity cost for the
production of y (manufactured goods).
the land in the country is arid and not suitable for agricultural products. Therefore, if half of the
arid land is not used at all:
(a) The economy could be productively efficient when the opportunity cost of x (agricultural
products) is infinite;
(b) The economy could be productively efficient when the opportunity cost of y (manufactured
goods) is zero;
(c) The economy could be productively inefficient with infinite opportunity cost for the
production of x (agricultural products);
(d) The economy could be productively inefficient with infinite opportunity cost for the
production of y (manufactured goods).
