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Please explain why the risk-averse customers purchase insurance. (1 point)
Please draw a graph to show their risk premium. (1 point)
Afghanistan reported its first COVID-19 case on February 24, 2020. As the infection spread, the government tightened containment measures, including introducing screening at ports of entry, quarantine for infected people, and closure of public places for gathering. In May, it waived electricity bills of less than Af 1,000 (US$13) for a family residence in Kabul for two months. The decision benefited more than 1.5 million Kabul residents.
Please draw a graph using budget line and indifference curve to indicate the subsitution effects and income effects for the families in Afghanistan after the government waived electricity bills. Assumed that there are two goods: electricity and other goods and services.
(2 points)
Shortly explain if the electricity is normal goods or inferior goods. (1 point); and the sign of total effects is negative or positive? (1 point)
A normative statement is a statement regarding
An increase in demand for notebook raises the quantity of notebooks demandes but not the quantity supplies is the statement true or false? Explain.
Suppose marginal utility of good X is 20 while its price is Rs. 4 per unit and marginal utility of
Y good is 50 while its price is Rs.5 per unit .The individual to whom this information applies is
spending 20 on each good .Is he maximizing his satisfaction.?
Suppose marginal utility of good X is 20 while its price is Rs. 4 per unit and marginal utility of Y good is 50 while its price is Rs.5 per unit .The individual to whom this information applies is spending 20 on each good .Is he maximizing his satisfaction.?
Suppose that a competitive firm’s marginal cost of producing output q is given
by MC(q) = 3 + 2q.
Assume that the market price of the firm’s product is $9.
a) What level of output will the firm produce?
b) What is the firm’s producer surplus? Please compute and illustrate graphically.
Suppose that the average variable cost of the firm is given by AV C(q) = 3 + q. Suppose that the firm’s fixed costs are known to be $3.
c) What are the variable cost ? Verify by checking the total cost function’s marginal cost !
d) Will the firm be earning a positive, negative, or zero profit in the short run?
Explain the price effect, income effect and substitution effect of a price change for a normal
commodity using suitable diagram.
Suppose the manager of a watchmaking firm is operating in a perfectly competitive market. His/her cost of production is given by C = 10+8q+2q 2 , where q is the level of output and C is total cost.
a) Which assumptions characterize a perfectly competitive market? How does this affect firms’ production ? (At which price will they supply ?) How does perfect competition affect firms’ long-run profits ?
b) If the price of watches is $20, how many watches should you produce to maximize profit?
c) Find fixed cost, average variable cost and marginal cost and sketch them in one diagram.
d) At what range of prices will the firm supply zero output ? Can you explain ?
how does a tax on a good affect the price paid by the buyer, the price received by the seller, and the quantity sold ?
