Microeconomics Answers

Select a business organisation closer to your household and identify the relevant fixed costs and variables costs, current production levels of the selected organisation. (The selected organisation maybe a small business located in your neighborhood). Develop a small write up (800 – 1500 words) on the cost behaviors for your selected organisation highlighting aspects such as average costs and marginal costs. (Present required graphical analysis wherever necessary). Considering the theoretical backgrounds on profit maximization of a firm, comment on whether the given organisation is operating/ producing at its profit maximizing quantity. (Your comments should be supported by an appropriate analysis).

13. Following are different algebraic expressions of the production function. Decide whether

each one has constant, increasing, or decreasing returns to scale.

a. Q = 75L0.25K0.75

b. Q = 75A0.15B0.40C0.45

c. Q = 75L0.60K0.70

d. Q = 100 + 50L + 50K

e. Q = 50L + 50K+ 50LK

f. Q = 50L2 + 50K2

In the short-run production period, given the total cost of production as:    

TC = wL + rK, where K is fixed

Prove that w/AP and SMC=w/MP

Suppose demand for inkjet printers is estimated to be Q_X = 1000 – 5P_X + 10P_Y – 2P_Z + 0.1_M. If own price (P_X) = 80, related prices, P_Y = 50, P_Z = 150, and income, M = 20,000; answer the following:

A.   Calculate own price elasticity of demand and interpret your result

B.    Calculate cross price elasticity of demand between X and Y and interpret your result

C.    Calculate cross price elasticity of demand between X and Z and interpret your result

D.   Calculate Income elasticity of demand and interpret your result

If a 12 percent rise in the price of orange juice decreases the quantity of orange juice demanded

by 22 percent and increases the quantity of apple juice demanded by 14 percent, calculate the

a. Price elasticity of demand for orange juice.

b. Cross elasticity of demand for apple juice with respect to the price of orange juice.

Choose two (2) examples of consumer goods and services in the output market that has a clear impact due to the pandemic. The examples of the goods and services could be either from the buyers’ side or the sellers’ perspective. Illustrate and explain your answers with the help of diagrams (pre-pandemic and during pandemic).

The Department of Agriculture of Economica (DAE) administers the floor price of milk at $4 per pound of milk. To support the price of milk at the price floor, the DAE had to buy up the surplus.

Suppose the Economica’s market demand and supply of milk are as given below:

Q = 120 – 20P (Market demand)

Q = 20P (Market supply)

Refer to the above-market demand and supply equations to answer the following questions.

i) Use the equations to draw the market demand and supply curves and determine the

equilibrium quantity and equilibrium for milk. 

under what condition will a firm shut down temporarily

3.Assum that the total expenditure of a consumer on two goods X and Y is birr 2000 and

prices of good X and Y are birr 50 and birr 40 respectively .Then formulate his budget

equation and sketch the graph.

Suppose the perfectly competitive firm’s cost function is TC=Q³-21Q²+600Q+1820 and its AR=600. (2Pts)                         

    a. What is the profit maximization level of output?

b.     What is the maximum of profit or minimum of loss?