Microeconomics Answers

1. Complete the table below and draw the TP, MP and AP curves.

Units of labour Total Production (TP) Marginal Product (MP) Average Product (AP)

0 0

1 20

2 50

3 90

4 120

5 140

6 150

7 150

8 140

(a) Indicated from which unit of labour does diminishing marginal returns occur ________

(b) On a marginal product curve the following

(i) Maximum total product

(ii) Increasing total product

(iii) Decreasing total product

A firm is employing 100 workers at a wage rate(W) = $l5lhour and 50 units of capital at a

rental rate® = $30lhour. At the firm's current input use, the marginal product of labor is 45 and

the marginal product of capital is 60. Is the firm producing its current level of output at the

minimum cost

a) Yes because MPL/W > MPK/R.

b) Yes because W<R

c) No because MPL/W > MPK/R

d) No because MPL < MPK

Carlo plants cucumber in his backyard. 1 pack of seeds yields 3 kilos of cucumber, 2 packs 5 kilos of cucumber and 3 packs of seeds yielded 6 kilos. One pack of seeds costs P100. Graph the production function and total cost curve.

Compute the following to get the equilibrium price and quantity.

1) Qd= 30-5P

2) Qs= 0+5P

Does a monopoly’s ability to price discriminate between two groups of consumers depend on its marginal cost curve? Why or why not

a. The marginal cost is so high that the monopoly is uninterested in selling to one group

b. The marginal cost is low enough that the monopoly wants to sell to both groups.

A firm is employing 100 workers at a wage rate(W) = $l5lhour and 50 units of capital at a

rental rate® = $30lhour. At the firm's current input use, the marginal product of labor is 45 and

the marginal product of capital is 60. Is the firm producing its current level of output at the

minimum cost

a) Yes because MPL/W > MPK/R.

b) Yes because W<R

c) No because MPL/W > MPK/R

d) No because MPL < MPK

Suppose you manage a local grocery store and you learn that Imtiaz super Market is about to open a store near you.

Use the model of monopolistic competition to analyze the impact of this new store on the quantity of output your store should produce (Q) and the price your store should charge (P). Note, we are assuming you each sell one representative good.

Explain how the opening of this new store may affect your business. Be sure to address what can happen to your customers, supply and demand, and prices. What will happen to your profits? Show graphically and explain your reasoning in detail. 

Explain at least one strategy that could be used to defend your market share against the new store (e.g., address what you are going to do to keep your customers).

why does the quantity of salt demanded tend to be unrespesponsive to changes in its price?

Mary jas homothetic preferences. When here income was $1000 , She bought 40 books and 60 newspapers. When her income increased to $1500 and the prices did not change she bought

A 60 books 40 newspapers

B 80 books 120 newspapers

C 60 books and 60 newspapers

D 40 books and 120 newspapers

E there is not enough information to determine what she would buy

You are given the following cost data:Total fixed costs are $60.

(q,TVC)➡️ (1,25) (2,40) (3,60) (4,90) (5,130) (6,185) .How many units of output will this firm produce at a price of $22 and at a price of $42? What is the total revenue and total cost at each price? What is the profit at each price? Briefly explain using the concept of marginal cost.