Microeconomics Answers

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 LKR /ticket

(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.

(c) Graph the demand curves, the marginal revenue curves, the marginal cost curve and highlight the equilibrium.

Suppose the demand function that firm faces shifted from Qd=100-2p to Qd=80-3p and the supply function has shifted fromQs=50+4p to Qs=80+5pso that find the effect of this change on priceand quantity? and Which of the changes in demand and supply is higher?

A monopoly firm faces a demand curve given by the following equation: P =$500 − 10Q, where Q equals quantity sold per day.lts marginal cost curve is MC = $100 per unit. Assume that the firm faces no fixed cost. You may wish to arrive at the answers mathematically, or by using a graph (the graph is not required to be presented), either way, please provide a brief description of how you arrived at your results.

a) How much will the firm produce?

b) How much will it charge?

c)   Can you determine its profit per day? (Hint: you can; state how much it is.)

d)   Suppose a tax of $1,000 per day is imposed on the firm. How will this affect its price?

e) How would the $1,000 per day tax its output per day?

f)   How would the $1,000 per day tax affect its profit per day?

g)   Now suppose a tax of $100 per unit is imposed. How will this affect the firm’s price?

h)   How would a $100 per unit tax affect the firm’s profit maximizing output per day?

i)   How would the $100 per unit tax affect the firms profit per day?

S=-120 + 0.25y investment level is $400 determine the equilibrium level using the savings/investment approach to equilibrium.

"Draw Demand/Supply curves for the following shifts in demand and supply:

Demand shifts but supply does not shift

Supply shifts but demand does not shift

Supply decreases and demand increases

Supply increases and demand increases"

Draw Demand/Supply curves for the following shifts in demand and supply:

Demand shifts but supply does not shift

Supply shifts but demand does not shift

Supply decreases and demand increases

Supply increases and demand increases

Neville's passion is fine wine. When the prices of all other goods are fixed at current levels, Neville's demand function for high-quality claret is Q = .02M – 2P, where M is his income, P is the price of claret (in British pounds), and Q is the number of bottles of claret that he demands. Neville's income is 7500 pounds, and the price of a bottle of suitable claret is 30 pounds.

(a) How many bottles of claret will Neville buy?

(b) If the price of claret rose to 40 pounds, how much income would Neville

have to have in order to be exactly able to afford the amount of claret and the amount of other goods that he bought before the price change?

(c) At the income level you mentioned in part (b) and the higher price of claret of 40 pounds, how many bottles would Neville buy?

(d) At the original income of 7500 pounds and a price of 40, how much claret would Neville demand?

(e) Decompose the total price effect into the substitution and income effect

6. A) Derived the equation of the aggregate supply curve from the wage setting and the price setting relations. 

B) Explain clearly how this curve is affected by a decline in each of the

following:

i)Oil price,

ii) Unemployment benefits, and

iii)Expected price level.

3. Given an economy with fixed prices, discuss the impacts of the following factors on the effectiveness of fiscal policy and monetary policy: i) degree of sensitivity of money demand to income (k), and

ii) degree of the sensitivity of interest to rate of interest (b).

MC = 10-2Q+2Q2

P = 8

Find the output and profit.