Microeconomics Answers

Essay Questions:

1. Discuss the usefulness of microeconomic analysis for the private (business) sector. You must use specific examples to support your argument.

2. Discuss the major components of a microeconomic model of your choice.

3. Discuss the two major theorems of welfare economics and their limitations. You can use diagrams where relevant.

4. Discuss the major flaws of perfectly competitive markets. How do these flaws provide the basis for the government's intervention in the economy?

5. Discuss the three major functions of the government.

Why is a monopolist's marginal revenue less than the

price of its good? Can marginal revenue ever be

fire Explain.

Given following data for the demand of movie tickets, calculate the price elasticity of demand when the prices changes from period :

1- A to B.

2- B to C.

3- C to B (by using midpoint elasticity method)

And find the degrees of elasticity for them.

The period

Price of ticket

Quantity of demand for tickets

A

7

100

B

8

90

C

9

75

Each unit of output sells for $10.00. Calculate the value of the marginal product of each

worker (VMPL)

(b) Suppose the price of wheat in the world market is lower than the domestic price of wheat in Grainland. Assume now Grainland wants to trade wheat in the world market.

Suppose the wage rate is $28, the price of capital also is $28 per unit, and the firm currently is producing 30.3 units of output per period using four units of capital and two units of labour. Is this an efficient resource combination? Why? ( Hint: Compare the marginal products of capital and labour at the initial input combination.)

Elaborate on the various economies and diseconomies of scale. Find articles with companies expanding or restructuring due to economies and diseconomies of scale.