Microeconomics Answers

Using appropriate graph show how the demand curve is derived from utility maximization

For each of the following statements, illustrate the effect of each event on the market for red snapper fish and indicate the effects on the equilibrium price and quantity.

i. A surgeon general warns that high-cholesterol foods such as beef cause heart attacks. (3 marks)

ii. A new fishing wire reduces the time taken to harvest fish while at the same time there is a report that persons have developed food poisoning from consuming fish. (3 marks)

Show the effect of pandemic an piyush optimal consumption Bundy assuming that substitution effects outweighs the income effects for book

a) The utility function for a consumer utility is U=30Q11/2Q21/2 . If the price per unit of Q1 is Kshs 10 and Kshs 5per unit of Q2, determine quantities Q1 and Q2 that the consumer should have to maximize utility if the consumer budgeted Kshs 350 (7 Marks).

b) Assuming there are two goods X and Y and two persons, analyze the exchange of goods between the two using the Edge worth Box framework indicating the Pareto efficient allocation (16Marks).

c) Clearly describe substitution effect and income effect for a fall in price for a normal good and an inferior good 

A market consists of four individuals A, B, C and D whose demand functions are: -

QA=70-2P

QB=200-4P

QC=20-0.5P

QD=240-4P

If the industry supply equation is given by 𝑄5 =40+3.5𝑃

Compute the equilibrium price and quantity and determine the quantities that will be

purchased by each individual.

A monopolist with the cost function C=1/2Q² faces a demand curve Q=12-P,

A.  What will be his equilibrium price and quantity?

B.  If for some reason the firm behaves as if it were in a perfectly competitive industry, what will equilibrium price and quantity?

C.  How much money will the firm require to forgo monopoly profits and behave competitively instead? 

Suppose that the demand and the total cost functions of a monopolist are P=24-3Q and C=Q²+8Q respectively, find the optimum quantity, price and profit on these levels.

If the total cost function of a firm is C=1/3Q³+5Q²+30Q+10 and the price under perfect competition is given as birr 6

A.  Find for what values of Q profit will be maximized

B.  Will the firm continue production at that output level? 

A perfectly competitive firm has a cost function of C=Q²+20Q+700 and the equilibrium price is birr 100. find

A. The profit maximizing level of output

B. The maximum level of profit 

Why is the firm to stop production if AVC falls below the P=MR line?