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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
A consumer has an income of $3000. Wine costs $3 per giass and cheese.an inferior good costs $10 per pound. The price of cheese fails from $10 to $6 while the price of wine remains the same, If the income remains constant, what wil happen to the consumption of wine and cheese Decompose into income and substitution effect
Study the given case carefully and answer the questions asked at the end.
In 1997, over $70,0000 million purchases were charged on credit cards, and this total is increasing at a rate of over 10 percent per year. At first glance, the credit card market would seem to be a rather concentrated industry. Visa, Master Card, and American Express are the most familiar names and over 60 percent of all charges are made using one of these three cards. But on closer examination, the industry seems to exhibit most of the characteristics of perfect competition.
a. What type of market is the American credit card market? And why? Explain. (10 Marks)
Do you believe that a new firm in the industry finds a difficulty to enter? Why? Give reasons.
Radisson Hotel had compiled a past year (2017) data on the numbers of rooms demanded by its clients as a result of room rate changes. During the off-peak season in May, a promotion was held and it discounted the room rate from $550 to $400. This promotion of room rate had brought in 700 room stays compared to 350 rooms stays before the room rate adjustment.
Calculate the price elasticity of demand of Radisson Hotel’s clients
Suppose the demand for commodity X as the function of its own price and consumer’s money income,
keeping other factors constant is described by the following equation:
X = 100,000 – 2PX + 7M; where M is consumer’s money income in Birr and PX is price of the
commodity X in Birr. If the price is Birr 10,000 and money income is Birr 15,000, then:
a. what is the total demand for X at the prevailing market price and income
b. calculate the income elasticity of demand for the commodity &; comment on the type of elasticity and
type of commodity
c. calculate the price elasticity of demand for the commodity and determine the type of elasticity
