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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 ?
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.?
(12+6.75)
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Explain the price effect, income effect and substitution effect of a price change for a normal
commodity using suitable diagram.?
Following information shows that a firm offering a good at different prices to groups of consumers with different levels of willingness to pay.
Inverse Demand for movies: P1 = 20 – 4Q1
Inverse Demand for students: P2 = 10 – Q2
MC = 4
(a) What price and quantity and maximizes profits if the firm charges each market?
(b) Demonstrate that charging different prices for the two groups results in higher profits than charging the same price for everyone.
Explain how production possibility curve illustrates scarcity,choice and oppourtunity cost
