Microeconomics Answers

Use micro (and relevant macro) economic analysis to justify your decision of relocating your business from one country to a particular country.

To compute economic profits, which costs are used?

1.     An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes.

a.     Who has the absolute advantage in coffee? Explain.

b.     Who has the comparative advantage in coffee? Explain.

c.      If the two countries specialize and trade with each other, who will import coffee? Explain.

d.     Assume that the two countries trade and that the country importing coffee trades 2 ounces of soybeans for 1 ounce of coffee. Explain why both countries will benefit from this trade.

The demand and supply functions of a product are given by the following

equations: Qd =1500 - 2P and Qs = -1300 + 2P

The government announces a program to support a price increase of $30 per kg of

this grain, which imposes a price floor of $730.

A. What are the equilibrium price and quantity before price support policy?

B. What quantity of grain is purchased by the consumers, supplied by the

producers and purchased by the government at the support price?

C. What is the change in consumer surplus, producer surplus and total surplus?

What is the cost of government to implement this price support policy?

D. Later on, the government changes the price support policy and provides

subsidy of $20 per kg sold. What is the price paid by buyers, price received by

sellers, change in consumer surplus, change in producer surplus and

government cost?

A firms production function is Q(L)=15l^2-0.1l^3. Find the number of workers required to maximise total product. for what number of workers is average product maximum

given a 10% fall in petroleum price and a 6.2 percent rise in daily wage paid to hired labour used for the production of rice in ghana. estimate the net effect of these changes on the production of rice, given that the elasticities production due petroleum price and daily wage are 1.15 and 1.25. respectively.

The Federal board of revenue imposed a tax lemon soda which needs to be paid by the sellers, what will be the effect in lemon soda market.

4. A firm operates in a perfectly competitive market. The market price of its product is 4 birr and the total cost function is given by 𝑇𝐶=13𝑄3−5𝑄2+20𝑄+50, where TC is the total cost and Q is the level of output.

a) What level of output should the firm produce to maximize its profit?

b) Determine the level of profit at equilibrium.

c) What minimum price is required by the firm to stay in the market?

A bus company operates two routes. On route 1, research suggests that the price elasticity is -0.8 and on the other route -1.3. The company has decided to revise fares upwards on both routes by 10% this year. Comment on the decision. What alternative pricing strategy would you suggest? 

Private profit maximising firms, operating within competitive markets, form the backbone of the dynamic capitalism which is capable of generating sustained and everlasting growth in standards of living in societies.”