Microeconomics Answers

1. The Bok Chicken Factory is trying to figure out how to minimize the cost of producing 1200 units of chicken parts. The production function is q = 100L0.5 K0.5. The wage rate is birr 9 per hour and the rental rate on capital is birr 4 per machine hour.

A. Find the minimum cost of producing 1200 units.

B. Find the maximum output that can be produced for a total cost of birr 720.

following are the demand and supply equations for a consumer good: (20)

Qd = 300,000/P (Qd = quantity demanded)

Qs = 30P (Qs = quantity supplied)

(P = Price)

Find the market clearing price and the quantity at the equilibrium. Also sketch the demand and supply curves.

The inverse supply for coal is P^s=2+Qs. The inverse demand function for coal is P^d=20-2Q^d. By how much does the consumer surplus increases when a $3 subsidy to consumption is introduced? (Assume that no tax was in place before the subsidy is introduced.)

Clayra allocates P 500.00 of her weekly food budget between two goods: X and Y. Suppose Good X costs P50.00 per piece and Good Y, P100.00 per piece. Construct Clayra’s budget constraint table. And Draw her budget line.

The following table shows the production possibilities of two countries in making cars and airplanes:

Hours needed to make one:

Amount produced in 2400 hours:

Car

Airplanes

Cars

Airplanes

Japan

30

150

80

16

United States

50

200

48

12

a.     What is the opportunity cost of a car in Japan? What is the opportunity cost of an airplane in Japan? (2)

b.     What is the opportunity cost of a car in USA? What is the opportunity cost of an airplane in USA? (2)

c.     By looking at the table, say which city has an absolute advantage in both the goods? Why? (2)

Japan has a comparative advantage in which good and USA has a comparative advantage in which of the two goods? Why? 

assume a pfizer has a monopoly in the antidepressants and pfizer cannot price discriminate Use a graph to illustrate the market price of Zoloft sold

Second question

2.consider a lottery with two equally likely outcomes ,$25 and $144,with associated utility function of individuals A,Ua(m)=root of 100m and individual B,Ub(m)=5m square

A.determine expected utility and utility of expect ed value of the lottery for each individual ?

B.define and compare certainty equivalent of individual A and B ?

C.compare risk premium of individual A and B ? why risk premium of individual A is higher ?

D.Compare and interpret the absolute risk aversion ,rA(m) of the two persons ?

3).consider a farmer in a rural village and a business man in an urban area that adopt various risk reduction strategies in Ethiopia .Assume also that most farmers in Ethiopia do not insure for crop and livestock failure and businessmen also hardly insured against property loss.

A) suggest at least two strategies adopted to reduce risk by each agent ?

B) explain concisely how each strategy can reduce risk by agents ?

1 a farmer faced with the choice of agricultural project A or B.in project A (crop production project ) and project B(dairy farming project ),the outcomes and the probabilities of out comes are as follows ፡

Project A

.10 percent chance of earning the profit of birr 16 million .

.80 percent chance of earning the profit of birr 9 million .

.10 percent chance of earning nothing .

Project B

.40% chance of earning the profit of birr 16 million .

. 30% chance of earning the profit of birr 8 million

.30% chance of earning nothing .

A.what are the expected values of these two projects .

B.which project should you recommend to the farmer and why ?

C.if the utility function of the farmer is u(w)=root of wealth ,where w is wealth of the farmer and which project should the farmer choose and why ?

A sample of 20 observations corresponding to the regression model

Y i =α + βX i + U i gave the following data.

∑y = 21.9

∑x = 186.2

∑ (x− ¯ x)(y− ¯ y) = 106.2

∑ (y− ¯ y) 2= 86.9

∑ (x − ¯ x) 2= 215.4

(a) Estimate α and β

(b) Calculate the variance of our estimates

Suppose a small country produces only food and clothing. An earthquake destroys many of the clothing​ factories, but the ability to produce food is unaffected.