Microeconomics Answers

An economist estimated that the cost function of a single-product firm is:

C(Q) = 80 + 20Q + 25Q² + 5Q³.

Based on this information, determine the following:

a. The fixed cost of producing 10 units of output.

$ 

b. The variable cost of producing 10 units of output.

$ 

c. The total cost of producing 10 units of output.

$ 

d. The average fixed cost of producing 10 units of output.

$ 

e. The average variable cost of producing 10 units of output.

$ 

f. The average total cost of producing 10 units of output.

$ 

g. The marginal cost when Q = 10.

$ 

In the aftermath of a hurricane, an entrepreneur took a one-month leave of absence (without pay) from her $6,000 per month job in order to operate a kiosk that sold fresh drinking water. During the month she operated this venture the entrepreneur paid the government $3,000 in kiosk rent and purchased water from a local wholesaler at a price of $1.40 per gallon. If consumers were willing to pay $2.30 to purchase each gallon of fresh drinking water, how many units did she have to sell in order to turn an economic profit?

Explain the following concepts.

a. Explain the substitution and income effects of a price change for a normal good and an inferior good.

b. List and explain three reasons why the demand for a good or service may be elastic. List and explain three reasons why the demand for a good may be inelastic.

c. Describe quantity and revenue responses to price changes when the price elasticity of demand (ϵ) takes on the following values:

(i) ϵ = 0,

(ii) 0 > ϵ > -1,

(iii) ϵ = -1,

(iv) ϵ < -1

The estimated equation for the Japanese Densuke Watermelon supply curve is Q = 100 + 0.8 p

where p is the price in dollars per kilogram and Q is the quantity supplied in tons per year. What is the price elasticity of supply at the points on the supply curve where the prices are p = $10 , p = $20, p = $200, and p = $500 and p → $∞ per kg? Draw the supply curve and show these elasticities on the diagram.

Suppose demand for inkjet printers is estimated to be Q = 500 – 0.6 p -5 px + 4 pz + 0.2 Y. where p is the price of inkjet printers, Y is income, and px and pz are the prices of related goods, X and Z. Suppose that p = 40, px = 25 , pz = 100 , and Y = $50, 000. Answer the following questions: 

a. What is the price elasticity of demand? Interpret and explain your results.

b. What is the cross price elasticity with respect to commodity X? Interpret and explain your result and give an example of what commodity X might be.

c. What is the coss price elasticity with respect to commodity Z? Interpret and explain your result and give an example of what commodity Z might be.

d. What is the income elasticity? Interpret and explain your result.

The demand for boxes of nails is estimated to be Q = 185 – 10 p + 3 Y, where income is measured in thousands of dollars. If p = 5, and Y = 30,

a. What is the income elasticity? Interpret and explain your result. What type of good is this?

b. How would the income elasticity change if the price were increased to $9.50? Interpret and explain your result.

Suppose in winters demand of dry fruits increases. Further supply of dry fruit increases due to favorable environmental condition. Explain with the help of demand and supply curve, how price and quantity will respond

The below table contains the information about the total utility a consumer gets from consuming water.

Chocolate

1

2

3

4

5

Total Utility

30

55

65

65

30

Find marginal utility.

Plot total utility and marginal utility curve by using above information.

Explain the relationship between the total utility and marginal utility.

Use a graph to explain the effect of an imposition by the government of a maximum price in the face mask market

The consumer's utility is given by u(x,y)=16x-3√√x+y. The price of good 2 is normalized to 1. Find the change in consumer's surplus if the price of good 1 changed from 10 to 5.