Microeconomics Answers

Let the price of pizza (X) is $2 per unit and the price of shakes (Y) is $ 1

per unit. The budget is $ 38. Marginal utility of X is MUx = 100 – 10x,

marginal utility of Y is MUy = 80 – 10y. Find:

How many of quantity of each item should be purchased in order to get

a maximum satisfaction.

The residents of the town Ectenia all love economics, and the mayor proposes building an economics museum. The museum has a fixed cost of $2,400,000 and no variable costs. There are 100,000 town residents, and each has the same demand for museum visits: 𝑄𝐷=10−𝑃 where P is the price of admission.

d) For the break-even price you found in part (c), calculate each resident’s consumer surplus. Compared with the mayor’s plan, who is better off with this admission fee, and who is worse off? Explain.

e) What real-world considerations absent in the problem above might provide reasons to favor an admission fee?

The residents of the town Ectenia all love economics, and the mayor proposes building an economics museum. The museum has a fixed cost of $2,400,000 and no variable costs. There are 100,000 town residents, and each has the same demand for museum visits: 𝑄𝐷=10−𝑃 where P is the price of admission.

Suppose a hotel exhibits constant returns to scale as it increases its output. If it increases all its inputs by 10%, its:

select

A. total cost will increase by less than 10%

B. average total cost will increase by 10%

C. output will increase by 10%.

D. long run average cost curve will shift to the right by 10%

Stackelberg model) In a duopoly industry, there are only 2 firms, firm 1 is the industry leader, while firm 2 is the follower. Firm 1’s cost function is: C₁=1.2²q₂+2 , firm 2’s cost function is:C₂=1.5²q₂+8. The market demand function is: P=100-Y . In a typical Stackelberg model setting, firm 1 makes its production decision first, then firm 2 makes its own decision.

1. Given any q₁, what is firm 2’s best response/rection function?
2. Given firm 2’s best response function, what is firm 1’s best production decision?
3. What is the Stackelberg equilibrium?

A used car salesman purchases a car from its previous owner at a price of $4,500, although the owner was willing to sell it for as little as $4,000. The salesman later sells the car to a new buyer for $6,000, although that buyer was actually willing to pay up to $6,500.

What percentage of the value created by the trade is captured by the buyer who purchases the car from the used car salesman?

A monopolist has cost function TC=10+2Q, where TC is the total cost of producing Q units of output. Demand in this market is given by the equation Q=14-P , where P stands for the price. Calculate the profite that the monopolist will be marking.

(Stackelberg model) In a duopoly industry, there are only two firms, firm 1 is the industry leader, while firm 2 is the follower.

Firm 1’s cost function is: C₁=1.2q²₁+2,

firm 2’s cost function is: C₂=1.5q²₂+8.

The market demand function is:P=100-Y .

In a typical Stackelberg model setting, firm 1 makes its production decision first, then firm 2 makes its own decision.

1. Given any q₁ , what is firm 2’s best response/rection function?
2. Given firm 2’s best response function, what is firm 1’s best production decision?
3. What is the Stackelberg equilibrium?

Assume that the banking system is loaned up and that any open-market purchase by the Fed directly increases reserves in the banks. If the required reserve ratio is 0, by how much could the money supply expand if the Fed purchased $2 billion worth of bonds?

The local shopping centre has free parking, but the centre is always very busy and it usually takes 30 minutes to find a parking space. Today when you found a vacant spot, Harry also wanted it. Is parking really free at this shopping centre? If not, what did it cost you to park today? When you parked your car today, did you impose any costs on Harry? Explain your answers.