Microeconomics Answers

Compare and contrast marginal rate of substitution and marginal rate

technical substitution.

Demand Curve: There is typhoon. What is the effect to the umbrella?

Price elasticity of supply by point elasticity method when energy sector is in equilibrium

XTC Ltd has total costs of $45,000 and it is currently producing 5,000 units. It has examined its cost structure and has found that its variable costs share a linear relationship with output. Fixed costs are $10,000. The market price is $10.

(a) Determine the MC, AVC and ATC functions (write down the equation) for the firm.

(b) Determine the current profit of the company.

c. Determine the degree of operating leverage at current output

Although not explicitly mentioned in Chapter 20, John Maynard Keynes is considered a foundational source in the understanding of macroeconomics. After performing research outside the textbook, please explain in three well-structured paragraphs the basic principles of the New Keynesian Economics and how it addresses perceived limitations to classical Keynesian theory.

Suppose that a typical firm in a monopolistically competitive industry faces a demand curve given by:

q = 60 − (1/2) p, where q is quantity sold per week.

The firm’s marginal cost curve is given by: MC = 60.

1. How much will the firm produce in the short run? 2. What price will it charge?

In addition to providing the quantitative answers for the question, please also describe the approach you used to arrive at your conclusions.

c) What will happen to the equilibrium quantity and equilibrium price of renewable energy resources if energy sector improves the technology? (Graph is not required)

a) What is the opportunity cost of increasing the production of trucks

from 4,000 to 7,000 (from A to B)? 2,000 boats; 9,000-7,000

Do each of a-d, both geometrically (you need not be precise) and using calculus. There are only two goods; x is the quantity of one good and y of the other. Your income is I and u(x,y) = xy + x + y.

(a) Px = $2; Py = $1; I = $15. Suppose Py rises to $2. By how much must I increase in order that you be as well off as before?

(b) In the case described in part (a), assuming that I does not change, what quantities of each good are consumed before and after the price change? How much of each change is a substitution effect? How much is an income effect?

(c) Px = $2; I =$15. Graph the amount of Y you consume as a function of Py , for values of Py ranging from $0 to $10 (your ordinary demand curve for Y).

(d) With both prices equal to $1, show how consumption of each good varies as I changes from $0 to $100.

Barbados currently uses a fixed exchange rate regime. If the central bank

were to increase the money supply, what impacts would it have on the

economy? Use a diagram to explain your answer.