Microeconomics Answers

Given a monopoly graph: If P = 10 - 2Q

1/ Find MR

2/ Identify the break even price

3/ Identify the Profit Maximizing Price and Quantity  

4/ Identify & shade the area of the deadweight loss that is consumer surplus 

Bob skipped breakfast but had lunch and dinner. By trial and error, figure out what Bob ate for each meal.

Answer Bank: Soup, crackers, cookie, cheese, sandwich, and carrots.

Does a competitive firm’s price equal the minimum of its average total cost in the short run, in the long run, or both? Explain.

Does a competitive firm's price equal the minimum of its average total cost in the short run, in the long run, or both ?

6. Does a monopoly’s ability to price discriminate between two groups of consumers depend on its marginal cost curve? Why or why not? Consider two cases: (a) the marginal cost is so high that the monopoly is uninterested in

selling to one group, and (b) the marginal cost is low enough that the monopoly wants to sell to both groups. (10)

Gametheory

9.1What is the difference between a cooperative and a noncooperative game?

Give an example of each. (4)

9.2What is a dominant strategy? Why is an equilibrium stable in dominant

strategies? (4)

9.3Explain the meaning of a Nash equilibrium. How does it differ from an

equilibrium in dominant strategies? (4)

9.4Explain your understanding of the prisoners’ dilemma game and give an

example of a pay-off matrix in this game. (9)

Qd1 = 90 – 2P1 + 3P2 – 5P3 ; Qs1 = P1 – 10

Qd2 = 36 + 3P1 – 3P2 + 2P3 ; Qs2 = –14 + P2

Qd3 = 45 – 3P1 + 3P2 – 3P3 ; Qs3 = P3 – 20

a. Determine the equilibrium prices and quantities for the three commodity Market

model.

1)     When price of X commodity rises from Br. 10 to 15, demand for

Y commodity declines from 200 to 150.

A) Calculate cross price elasticity.

B) Based on the result, what kind of relation exists between the two goods?

1)     Given market demand Qd = 50 - P, and market supply P = Qs + 5

A) Find the market equilibrium price and quantity?

B) What would be the state of the market if market price was fixed at Birr 25 per unit?

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