Microeconomics Answers

Using examples of your choice, discuss whether the desirability of the worldwide movement towards the market economy and away from the planned economy

Should an economics model describe reality exactly

Explain the causes of the marginal rate of substitution (MRS) if good is perfect substitutes and perfect complements.

In a supply demand diagram, show how a tax on buyers of luxury cars affects the

market. Clearly show the incidence of tax on buyers and sellers. Should the

Government impose such a tax? Why or Why not?

When demand and supply change in the same direction we can unambiguously

say how the equilibrium price and quantity change. Explain using diagrams

whether the statement is true or false.

Farmer McDonald gives banjo lessons for $20 an hour. One day, he spends 10 hours planting $100 worth of seeds on his farm. What opportunity cost has he incurred? What cost would his accountant measure? If these seeds yield $200 worth of crops, does McDonald earn an accounting profit? Does he earn an economic profit?

Will the envelope curve be tangential to the bottom of each of the short-run average cost curves? Explain why it should or should not be.

Explain why it is not possible for a monopoly firm to maximize its profits by charging a price in the price region where demand is inelastic, even though there are no direct substitutes for its product. Also explain how a monopoly will be able to charge a higher price than a firm producing the good under perfect, oligopolistic, or monopolistic competition

Consider supply in the long run. Assume that a specific tax is imposed on a good that was   previously untaxed. How will the incidence of this tax change as time passes?  

 Show in four diagrams the incidence of an indirect (specific) tax in the case of elastic and inelastic demand and elastic and inelastic supply.