Microeconomics Answers

A fall in price of from 1 shs 0.50 per bushel to 9.20 per bushel, the quantity of the demand from 18800 to 21200 per bushells. What is the price elasticity of demand?

A new factory in a small town has an annual payroll of $6 million. It is expected that 60% of this money will be spent in the town by factory personnel. The people in the town who receive this money are expected to spend 60% of what they receive in the town, and so on. What is the total of all this spending, called the total economic impact of the factory, on the town each year?

1)     Consider a consumer with a utility function U (x, y) =X² + Y², the consumer intends to spend birr 80 on the two goods and price of good X and price of good Y are birr 2 and birr 4, respectively

A.   Calculate the optimum consumers consumption amount of X and Y

B.    Find the maximum utility that consumer obtain from consuming the two goods?

C.     Calculate MRS_xy at equilibrium, and interpret your result

Suppose market of a good x can be illustrated by following two equations.

Deman P= 82-0.07Q

Supply P= 14+0.09Q

a) Calculate the equilibrium and quantity in the market.

b) Suppose a tax of $3 is imposed on the supplier of this market. Calculate the quantity after tax, consumer's price, producer's price and government revenue.

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 = 100L³5 Kº". 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.

What is the opportunity cost of a car in Japan? What is the opportunity cost of an airplane in Japan? 

5. Suppose a consumer has income of 200 birr per month and he wants to spend

all of his income on two goods- X and Y whose prices are birr 4 and birr 5

respectively. Based on this information answer the following questions:

a. Express the budget line of the consumer both algebraically and

diagrammatically.

b. Compute the equation of the budget line.

c. Determine the slope of the budget line and interpret the result

e. What will happen to the original budget line?

Plot graph of

Qd=20-4p, where p=#2,4

Qs=12+3p, where p=#2,4

Suppose a consumer’s preference (utility function) is represented by: 0.25 0.75 U  X Y ; where U is total utility

of the consumer derived by consuming commodity X and Y. The price of X is Birr 4 while the price of Y is

Birr 2, and the consumer’s money income is Birr 1600. Then:

a. write the budget line equation and determine its slope

b. determine the marginal utilities for both commodities

c. calculate the optimal consumption bundle mathematically

d. calculate the income shares of both commodities

The demand and supply for chocolates in country A is given by P=B00-0 and PO respectively Country A, a small economy is in autarky.(5) a) Suppose country A opens up to international trade If the world price for chocolates is $200, calculate equilibrium price and equilibrium quantity. b) Graphically show the change in consumer and producer surplus when country A opens to trade