Microeconomics Answers

According to the circular flow what is the reason for the three key sectors to work together

q=100kL. If the price of capital is r= $120 per day and the price of labor is w= $30 per day, What is the combination of labor and capital if the manufacturer wants to produce 100 units? 

How do oligopolistic firm maximizes profits in the short run

In 2021, a major ice storm hit the northern areas. The storm brought down power lines and trees, cutting electricity in many areas, making travel difficult, and slowing down repair crews. Heating homes became a major challenge. The storm created shortages of power generators. As a result, those products sold at prices much higher than normal. These high prices provoked cries of “price gouging” and calls on the government to impose price controls to prevent gouging. While no one likes to pay a higher price than normal for something, consider what would have happened with a price ceiling. The economic intuition is revealing.

Draw a diagram showing the market for generators with an equilibrium price at Rs.25,000. Now impose a price ceiling at Rs.20,000 per generator. What would be the impact of the price ceiling on the quantity demanded? On the quantity supplied? Who would benefit from the price ceiling and who would be harmed? Let the graph guide your thinking. Don’t start with your gut reaction!

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).

Compute the following to get the equilibrium price and quantity.

1) If Qd = 30-2P and Qd is 4. What is now P?

2) If the Demand Function is Qd = 30-2P and P is 2. What is now Qd?

3) Qd= 30-5P

4) Qs= 0+5P

Compute to get the equilibrium price and quantity.

1) Qd= 30-5P

2) Qs= 0+5P

The price of oil has been all over the place in the last few years; it went up, then down and back up, back down, and now edging up again, thus driving the price of gas up and down. Right now, it is $2.19 where I buy gas, very low compared to two years ago. Related to that is the cost of refining it into a usable product. We actually have plenty of oil right now; it is scarce, but plentiful, especially with the new development of shale oil fields in the Dakotas and in Texas. However, the country has limited refinery capacity and we have not built a new refinery in over 20 years. The Keystone pipeline, if it is ever built, will carry oil from Canada and North Dakota all the way to Texas to be refined into gas and then trucked back to places like North Dakota and Nebraska. 

Why not refine some of that oil in the region, thus saving a lot of shipping cost? 

Why wouldn't the oil companies build refineries nearer their sources or their markets?

For a price taker P=MR. True or false

Assuming that the equation f(Q, P1, P2, Y) = 10P1Q1 + 5Q1 - 2P2 - 4Y -18 =0

defines an implicit demand function Q1 = Q1(P1, P2, Y), find own price elasticity , cross elasticity and income elasticity at a point (P1, P2, Y) = (2, 1, 20)