Microeconomics Answers

New cars are normal good and people’s incomes increase . Simultaneously , auto manufactures must pay more for their worker’s health insurance . What is the effect on price and quantity of new cars ?

Suppose a consumer consuming two commodities X and Y has the following utility function 0.4 0.6 U  X Y .

If price of good X and Y are 2 and 3 respectively and income constraint is Birr 50.

a. Find the quantities of X and Y which maximize utility.

b. Show how a rise in income to Birr 100 will affect the quantity of X and Y.

c. Calculate the maximum utility for case “b”.

Given utility function: U(x, y) = X1/3Y2/3, Px = 2, Py = 5 and M = 400, find:

a. The demand equation for X and Y.

b. The utility maximizing levels of X and Y.

c. The maximum utility.

d. The MRSx, y at the optimum level.

Indian Airlines have a capacity to carry a maximum of 10.000 passengers per month from

Calcutta to Guhawati at a fare of Rs. 500. Variable costs are Rs. 100 per passenger and fixed

costs are Rs. 30,000 per month. How many passengers should be carried per month to break

even

1) Suppose that the elasticity of supply for wheat is 0.3 and for magazines is 1.3.

a. If the price of wheat rises 10%, what is the increase in quantity of wheat supplied?

b. If the price of of a magazine rises 10%, what is the increase in quantity of magazine supplied?

c. Which good does the quantity supplied respon more strongly, wheat or magazines?

1) New cars are normal good and people’s incomes increase. Simultaneously, auto manufacturers must pay more for their worker’s health insurance. What is the effect on price and quantity of new cars?

2) The table below gives a supply schedule.

Point | Price (RM) | Quantity Supplied

A 5 10

B 15 30

C 25 50

D 35 90

a. Using the midpoint method, calculate the price elasticity of supply between points A and B; between B and C and between C and D.

b. Why is the elacticity of supply always positive?

c. Why does the elasticity of supply increase in value as more time passers after a price hike?

1. Define economics, distiguish between microeconomics and macroeconomics and explain the basic economics problems.
2. Ditinguish between changes in quantity demanded and changes in demand.
3. How is a shortage different from a surplus?
4. People read that drinking orange juice helps prevent heart disease. What is the effect on the equilibrium price and quantity of orange juice?
5. The cost of memory chips used in computers falls. What is the effect on the equilibrium price and quantity of computers?
6. You are told that a 10% increase in the price of a good has led to a 1% increase in the quantity supplied of the good after one month. Use the information to answer the following questions?

a. How you decribe the supply of this good?

b. Calculate the price elasticity of supply.

c. If after one year, the quantity supplied has inceased by 25%, calculate the new elasticity of supply.

1)     Suppose the average revenue of a short run perfectly competitive firm is 2 and its Marginal cost and fixed cost is given as: MC=3Q² -8Q+6 and TFC=10 then,

A.   Derive the function of TC, AVC and TR

B.    Calculate equilibrium price and quantity

C.    Find the profit at the equilibrium point and identify whether the firm makes positive profit, normal profits or incurs loss.

D.   What price is needed for the firm to stay in the market? 

What do you mean by envelop curve.explain with the help of optimum plant size.

if a firm lays off workers during a recession how will the marginal productivity change