Microeconomics Answers

Elasticity. Determine the elasticity at Q = 20.
D: P = 240 - 4Q

Economic Profit. What is the economic profit given this set of projects?
Project Acct Profit
W 100
X 400
Y 250
Z 520

Opportunity Costs. What are the opportunity costs given this set of projects?
Project Direct Costs Total Benefits
A 800 860
B 40 240
C 200 320
D 360 660

If you were an economist for a firm that wanted to merge, would you argue that the three-digit or five-digit NAICS industry is the relevant market? Why?

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?

3. Assume in an industry where there are no barriers to entry and firms are marking an economic loss 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 profit in the long run?

4. In a market structure where firms are mutually interdependent, price competiton is not common . Explain using the game theory matrix, with relevant assumptions, how firms make decisions when they collusive and non-collusively. In the absence of price competiton, how do firms maintain or increase their market share?

1. Ceteris Paribus, when the demand for Internet service have increased the government has introduced strict regulations on internet providers, resulting in the decrease in the number of Internet providers, Using demand and supply analysis what will be the impact on price and quantity in the market for Internet services. (Hint : There are 2 scenarios working at the same time)
2. The outbreak of Bird flu in 1997 resulted in the Hong Kong government ordering the culling of more than 1.5millions chickens. The culling of chickens was stimultaneously 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? (Hint : There are 2 scenarios working at the same time)

3. Assume that the short-run cost and demand data given in the table below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Compute the marginal cost and marginal revenue of each unit of output and enter these figures in the table.

Output Total cost Marginal cost Quantity demanded
Price Marginal revenue
0 $ 75 0 $180
1 120 45 1 165 $_____
2 135 15 2 150 _____
3 165 30 3 135 _____
4 210 45 4 120 _____
5 270 60 5 105 _____
6 345 75 6 90 _____
7 435 90 7 75 _____
8 540 105 8 60 _____
9 660 120 9 45 _____
10 795 135 10 30 _____

(a) At what output level and at what price will the firm produce in the short run? What will be the total profit?



(b) What will happen to demand, price, and profit in the long run?

Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1 per poster. She has fixed costs of $100. Her variable costs are $1,500 for the first thousand posters, $1,200 for the second thousand, and then $800 for each additional thousand posters.

Consider a particular market-clearing price and quantity under a perfectly competitive equilibrium. As the demand curve at this point becomes more inelastic, the consumer surplus in the market tends to

a. increase.
b. decrease.
c. remain the same.
d. We do not have enough information to answer this question.