Microeconomics Answers

Suppose you are given RM500 each month to spend on meals and sports. Each meal will cost you RM5 and each sport will cost you RM2 per time you spend. Explain with a diagram to show that you have achieve an optimum consumption. Carefully derive the bundle of meals and sports at the optimum consumption point and the intercept points in your diagram. Could you able to obtain a higher optimum consumption point if your budget remains at RM500? Explain.

1.

Given the following demand and supply function of milk in a market.

Q_{d} = 28 - 4P

+ P respectively.

Q_{s} = 18

i.

and

Determine the equilibrium price and quantity of milk?

ii.

If government fixes price at GHC 1.00, find the quantity demanded and supplied of milk and comment on the situation market. in the

What is the full economic price that consumers would end up paying as a result of (ii) above?

A producer, in order to maximize his level of production must consider 2 major factors. Given a 2 resources: labor and capital, what must he take into account to attain a certain level of production. How is producer's equilibrium obtained? Explain.

Identify using examples the three types of economic systems

A monopolist firm faces a demand with constant elasticity of -2. It has a constant marginal cosy of 20$ per unit and sets price to maximize profit. If marginal cost should increase 25%, would the price charged also rise by 25%?

Suppose there are three types of Apples A, B and C being sold and consumed. The demand and supply equations for each type are:

Da=20-2Pa+4Pb+Pc; Sa=4Pa-5; Db=10+3Pa-5Pb+2Pc ;Sb=3Pb-7;Dc=70+4Pa+2Pb-5Pc ;Sc=5Pc-16

Determine equilibrium prices and quantities using Cramer’s rule.

• Calculate the elasticity of demand for B with respect to prices of variety A, B and C and interpret the economic meaning of the results.

What is macroeconomics

The demand and supply equations for a product are:

Qd= 300 — 6P and Qs= -40 + 6P.

Determine the market equilibrium and draw graphs.

Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain.

Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus, and deadweight loss

(2) (a) What is product differentiation? In what market structure is this an essential feature? Briefly explain, at least, three different ways firms in this industry differentiate their products from those of other firms.

(b)Suppose a firm in this industry faces the following demand and total cost functions: 

                                                                                             P = 5900 – 10Q  

                                                                                                          3     2

                                                                                            TC = 2Q - 4Q +140Q + 845.

Determine the profit maximizing output the firm should produce, the market clearing price and the total profit (if any) to be earned.

Suppose short run production function of a firm is given by Q = 600L2 - L where Q is the level of output and L is the number of labours employed.

a. Compute optimum labour use for a profit maximizing firm.

b. Over what range of labour does this firm experience increasing marginal product?

C. Over what range of labour does this firm experience diminishing marginal product?

d. Over what range of labour does this firm experience a negative marginal product?