Microeconomics Answers

Using the information below, calculate the student’s economic surplus:

A student is offered a job making copies in the college library. The job is two days a week from 2pm-3pm. The student’s reservation wage is $10 per hour. The head librarian offers the student $80 per week for the job.

A. $10 per week

B. $20 per week

C. $60 per week

D. $80 per week

Christopher purchased auto insurance for a new car. His insurance provides bumper-to-bumper coverage. Because of his type of insurance, Christopher will most likely _____. This behavior is because _____.

A. drive more cautiously than if he didn't have insurance; moral hazard

B. drive more cautiously than if he didn't have insurance; adverse selection

C. drive less cautiously than if he didn't have insurance; adverse selection

D. drive less cautiously than if he didn't have insurance; moral hazard

Suppose the market demand function is given by D(PD) = 60—PD and the supply is S(P) = 2PS.

a) Find the market equilibrium without taxes where PD = PS

b) Suppose now the supplier is required to a per unit tax of t = 3. Draw a graph to to show the change in the supply curve. Find the equilibrium quantity and prices, q*,PS*,and PD*. How much of the per unit tax is passed on to the consumer?

c) Suppose now that the demander is required to a per unit tax of t = 3. Draw a graph to show the change in the demand curve Find the equilibrium quantity and prices, q*, PS*, and PD* .Compare your answers in parts b) and c).

d) Calculate the change in consumer’s surplus, change in producer’s surplus, and dead weight loss as a result of the policy change. Illustrate them on a graph.

1. TRUE or FALSE . All credits will be assigned to explanations.

a) For a normal good, the marginal revenue curve always lies below the demand curve.

b) In a two good model, if one good is an inferior good, then the other good must be a luxury good.

c) Montreal will have (hopefully) a very mild winter. Suppose the supply of down coats does not change. In the market equilibrium this winter, the quantity of down coats sold will go down because demand decreases.

d) Two firms employ the same factors of production to produce the same product. We also know that both of their technologies exhibit constant returns to scale. Then. if the factors firm 1 uses are exactly twice the amount of those firm 2 uses. then firm 1 must produce twice the output that firm 2 produces.

Calculate the income elasticities for the following demand functions.

a) x(p,m) = m/2p*

b) x(p,m) = 10/p*

Why might it have been useful for Nintendo co. to calculate the price elasticity of demand for its Super NES system

Consider a competitive market for apartments. What would be the effect on the equilibrium output and price if the consumer’s income increases?

Consider an economy can produce two goods butter and guns. Draw Production possibility frontier for butter and guns. Assume that scientific inventions have doubled the productivity of society's resources. Redraw the Production Possibility frontier

please explain with graph

Draw a demand and supply curve for the real estate market and explain

Draw a production possibility frontier (PPF) for an economy between the clean environment and the quantity of industrial output. What determines the shape of the PPF? Using this PPF, explain in detail the trade-off that the Society faces.