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The Jamaican government administers two programs that affect the market for cigarettes. Advertisements and labeling requirements which are aimed at making the public aware of the dangers of cigarettes. At the same time, the Ministry of Agriculture limits the amount of land that can be devoted to tobacco production. Are these two programs useful in the goal of reducing cigarette consumption?
2.1 Consider the production function: Y=2X + 16X2- 0.4X3 a) Derive marginal value product (VMP) and average value product (AVP) equations. [04] b) At what levels of X do the TPP reach its maximum? [03] c) At what level of X does stage two (II) begin or stage one (I) end? [04] d) Find and interpret elasticity of production (EP) when X = 1. [02] 2.2 Market structures are referred as the competitive environment in which the buyers and sellers of the product operate. A market consists of all the actual and potential buyers and sellers of a particular product. Discuss thoroughly oligopolistic and perfect competitive market structure and give examples of each form of the market structure. [08] 2.3 Differentiate between product market and labour market (Use diagrams that explain the interactions in the markets). [04
2.1 Consider the production function: Y=2X + 16X2- 0.4X3 a) Derive marginal value product (VMP) and average value product (AVP) equations. [04] b) At what levels of X do the TPP reach its maximum? [03] c) At what level of X does stage two (II) begin or stage one (I) end? [04] d) Find and interpret elasticity of production (EP) when X = 1. [02]
1.2Suppose that Rose’s monthly income is 200 R/month and she spends her income on two goods: movies and books. The price of movies is Pm=R20 and price of books Pb=R10. Answer the following questions. a) Suppose she spends all her money on these two goods. Draw her budget constraint. Show at least 4 points on this constraint which are attainable (Put books on the horizontal axis). [05] b) Last month she went to movies 5 times and bought 10 units of books. Is this attainable for her? Show it on the figure you sketched in ‘a’. [03] c) Suppose the price of movies increased to R25. Sketch her new budget line. Can you tell from this information how she could allocate her budget between the two goods in order to maximize her utility? Show your workings. [06
1.1 Kagiso has R30 to spend on sugar and salt. Kagiso’s marginal utilities from sugar and salt are shown in the following table. Quantity of sugar MU Quantity of salt MU 1 20 1 40 2 12 2 20 3 9 3 9 4 5 4 7 5 3 5 5 6 1 6 3 i. Suppose that a unit of sugar is priced at R5 and the price of a unit of salt is R10. Compute the weighted marginal-utility for sugar and salt and enter these values in the table. [04] ii. Given Kagiso’s R30 budget, how many units of sugar and salt will be purchased? Explain how you arrived at this answer. [02] iii. Suppose the price of salt stays constant at R10 and the price of sugar falls to R3. How many units of sugar will be demanded at this price? Carefully explain your reasoning. [03] iv. Draw Kagiso’s demand curve for sugar. Does it conform to the law of demand? Why? [02
Suppose the supply of lemonade is given by Q= 40p were q is measured in pints and p is measured in cents per pint and the demand for lemonade is given by Q=5000-10p. Now suppose bumper weather conditions improve the harvest of lemons so producers increase the quantity supplied of lemonade by 200 pints at every price. What are the equilibrium P and Q for a lemonade after the bumper weather conditions
Use the equations below to answer the following questions
P=60-1/3Qd
2p=40+2/5Qs
Calculate the equilibrium price and quantity
If the is set at p=40,state whether it is a price ceiling or price floor and calculate the size of imbalance
Calculate the price elasticity of demand and supply
What is returns to scale
The demand for schedule for beer is Xd=25-P, where Xd is the quantity demanded of beer in millions of barrels per year and P is price in dollars per barrel.
If the supply curve for beer is Xs = -20 +4P, what is the equilibrium price of a barrel of beer?
Calculate and interpret price elasticity of demand and supply at the equilibrium point.
What would the effect on the price of a barrel of beer if a tax of $ 4 per barrel is imposed by the government?
If the market demand decreases by 50% what will be the new clearing price and
quantity for this market?
