Microeconomics Answers

Use demand and supply curves to illustrate and explain why rare items, such as the Mona Lisa painting by Leonardo da Vinci, are sold at such high prices

Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption.

(i) Discuss the impact of the good harvest on each of the three markets. (6 marks)

(ii) Discuss the effect on the markets for each of the three products if the government implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers, rum producers and whiskey producers? 

During the summer of 2018, the owner of the outlet offered a discount of 10 percent ,and sales soared from 700 bottles per month to 1500 bottles per month .The discount was withdrawn subsequently.

This time , to the owner’s dismay ,the sales went up marginally from 700 bottles per month to 800 bottles per month ,and since a reduction in the price had already been announced ,the owner could not revert to the old price soon .He could not reason out as to why the pricing strategy had failed.

You are required to analyze the reason for the failure of the pricing strategy. While analyzing ,the following points should be used.

i)                   Price elasticity of demand during the summer of 2018.

ii)                 Factors that have changed since then.

iii)                The effect of these changed factors on the price elasticity and the resultant new price elasticity.

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why the cost of producing output increases as the number of labor increases ? because the wage of the labor will be equal to marginal product of that labor hence for deminishing marginal returns the producer have to pay only for the output that the extra unit of labor have produced so how does the cost increase? If for deminishing marginal returns two labors produces one unit of output but as the real wage will be equal to marginal product of labor so each of the labor would be paid for 50% of the value of the output....So how does the cost of production increase with increasing labor input?

Claire consumes 𝑐1 and 𝑐2 in period 1 and period 2 respectively, and her

intertemporal utility function is 𝑈(𝑐1 , 𝑐2 ) = 2𝑐1^2 c2^2. Her income in period 1 is 𝑚1= $1,500 and period 2 is 𝑚2 = $2,000. Assume that the interest rate is 10% for both borrowing and saving. [25%]

a. Find the intertemporal budget constraint for Claire.

b. Find the optimal consumption.

c. Assume now that the interest rate for saving is only 5%. Find the new

intertemporal budget constraint.

d. Would Claire be better off at the new interest rate in (c)? Discuss.

Find all Nash Equilibria using both pure and mixed strategies. (a)

(b)

H D

F B

HD (1,1) (0, 0) (0, 0) (1, 1)

FB (3,2) (1, 1) (0, 0) (2, 3)

Consider the following payoff of a penalty shooting.

Goalie LR

 L (50, -50) (20, -20) R (40, -40) (90, -90)

Kicker

With which probability should the goalie defend left?

Suppose the total-cost function for a firm is given by .C=qw^2/3 v^1/3

a. Use Shephard’s lemma to compute the (constant output) demand functions for inputs l and k.

b. Use your results from part (a) to calculate the underlying production function for q (q as a function of “k” and “l”).

Andrew has decided to open an online store that sells home and garden products. After searching around, he chooses the software company Initech to provide the software for his website since their product required the least amount of specialized investments for him to use it. They agreed upon price of $7,000. To use Initech’s software, Andrew makes $3,000 in sunk capital investments and spends 70 hours learning how to use Initech’s software, which is very different from other software packages. Both Andrew and Initech view Andrew’s time as worth $25 per hour and Initech is fully aware of the investments Andrew must make to use their product. After Andrew’s investments were made, Initech came to Andrew and asked for more money. 

What do you think is the new price Initech requested Andrew to pay?

If a firm manager has a base salary of $100,000 and also receives 6 percent of all profits, what percentage of his/her final income will be from a profit-sharing plan when profit equals $1,500,000?