Microeconomics Answers

Which of the following statements are positive and

which are normative:

a A cut in wages will reduce the number of people

willing to work.

b High interest rates prohibit many young people

from buying their first home.

c No family ought to pay more than 25 per cent of its

income in taxes.

d The government should reduce its expenditure on

roads and increase its expenditure on railways.

If the supply curve is perfectly elastic and demand is linear and downward sloping. what is tne ettect of a sl specific tax collected from producers on equilibrium price and quantity?

If the supply curve is perfectly elastic and demand is linear and downward sloping. what is tne ettect of a sl specific tax collected from producers on equilibrium price and quantity, and wnat is the incidence on consumers? Why?

Consider the following TR and TC function for a firm operating in a perfect competition

market:

TR = 21Q

TC = 1/3Q3 – 5Q2 + 42Q + 81

A. Determine the profit maximizing or loss minimizing equilibrium level of output?

B. Compute the level of profit or loss at the above equilibrium quantity and comment on

the decision of the firm?

All normal goods whether they are economics goods , services or simply leisure will always

have IE and SE move in the same direction. True , False or Uncertain.

The price of cheese rises from $6 to $10 per pound, while the price of coke remains $3 per glass. For a consumer with a constant income of $3,000, show what happens to consumption of coke and cheese

How to compute the fixed cost,total cost,marshalls cost average variable cost,average fixed cost and the average of total cost of farmer banjo..

(Hicks decomposition) A consumer spends an income of m on two goods x1 and x2. The price of x1 is p1, and the price of x2 is p2. Draw pictures and use the Hicks decomposition to illustrate the income effect and substitution in the following two cases.

(i) Initially, the consumer spends all his money on x2. Show how an increase in p1 affects the consumer’s choice.

(ii) Initially, the consumer purchases both goods. Show how an increase in p1 affects the consumer’s choice of x2 if x2 is inferior goods.

The market for durian in Kuala Terengganu is competitive and has the following demand schedule:

Price

1

2

3

4

5

6

7

8

9

10

11

12

13

Quantity Demanded

1200

1100

1000

900

800

700

600

500

400

300

200

100

Compute each seller’s total cost and average total cost for selling 1 to 6 durians.

Suppose that unusually hot weather causes the demand curve for ice cream to shift to the right. Why will the price of ice cream rise to a new market- clearing level?