Microeconomics Answers

In the current pandemic-related GDP growth slowdown across the world, which industries or sectors in the Indian economy do you consider to have most benefited from the Covid-19 crisis and why? Explain and highlight in detail using the Demand-Supply analysis to substantiate your argument. Justify your analysis by supporting it with facts-cum-online data and substantiate your argument by extensively using graphs to highlight your answer

11 1. Recall the lemons problem at the start of the chapter. Some used cars are peaches, worth $3,000 to buyers and $2,500 to sellers, and some are lemons,. worth $2,000 to buyers and $1,000 to sellers. There is a fixed supply of cars and unlimited demand. Suppose there are twice as many peaches as lemons. Assume buyers can't tell the quality of a given car, while sellers can. What do the supply and demand curves look like? In the text, we asserted that markets clear at $2,666.67. Are there other market clearing prices?

The demand and supply equations for a commodity (in a free market) are given as;

Qd = 10 - 2p

As = 4p - 8

a. Given that p is in naira, Qd and Qd are in kg. Determine

(a) the equilibrium price and

(b) the equilibrium quantity

b. (i) if the price (p) were to be N4.00, what will be excess supply?

(ii) if the price were fixed at N1, what will be the excess demand?

"Contrast penalties vs. legalizing and taxing illegal drugs from the fairness perspective (refer to the two principles of fairness)". 

Suppose a certain city has a monopoly cable-television company. This company has total costs TC = 0.25Q² + 30Q + 70. (Hint: using calculus, this means MC = 0.5Q + 30 since MC is the derivative of TC with respect to output.) 

The demand in the community is approximated by the equation Q_d = 60 - P/2 (alternatively, you can write the demand equation as Q_d = 60 – 0.5P).

·       Graphically depict the demand curve as well as the marginal cost (MC) curve. 

·       If the cable company is free to choose its own price P_m and quantity Q_m, graphically depict the monopoly equilibrium price and quantity. Add any other curve(s) to your diagram that may be required to obtain this outcome.

·       Compute and state the exact monopolist equilibrium price P_m and quantity Q_m that you depicted graphically.

Contrast penalties vs. legalizing and taxing illegal drugs from the fairness perspective (refer to the two principles of fairness)". 

A firm producing hockey sticks has a production function given by

q=2√kl

The price of labor is “w”, the price of capital is “v”. For any given level of output “q”:

1. Calculate the firm’s long-run total, average and marginal cost function.

2. Please show the cost function is homogeneous of degree 1 in input prices.

3. Please show the cost function is concave in v.

Suppose now that capital used for producing hockey sticks is fixed at “k1” in the short run.

4. Calculate the firm’s short-run total costs as a function of q, w, v, and k1.

. This has been caused mainly by rising prices of domestically- produced goods and services. The government is considering a change in its economic policy to deal with this problem. The proposed policy change would provide a monthly cash transfer of $500 to all individuals in employment who are making $3000 or less each month. The government estimates that 35% of the working population. The government intends to pay for this cash transfer to low-income individuals by imposing a 2% tax on all imported goods and services. does not intend to change its sales tax, which applies to all goods and services consumed, whether domestically-produced or imported. the government recognizes that many firms use both domestic goods and services as inputs into their production processes. The government is concerned that there might be an increase in unemployment due to rising prices. The central bank is considering whether it should raise or lower interest rates, which affects the cost of capital as a factor of production

3.1 Use a graph to explain the effect of an imposition by the government of a maximum price in the face mask market. (7)

3.2 Briefly describe any four (4) factors that could result in a product having an inelastic demand.

Given a cobb – Douglas production functionQ = L0.5 K0.4And the prices of capital and labour are ksh3 and ksh 4 respectively while the firm outlay is Kshs.108, calculate the optimal combination of factors inputs.