Microeconomics Answers

Suppose the production function of an economy is given by:

Y = A̅K3/4 L1/4

A. Prove the production function is a homogeneous and follows a constant returns to scale.

Interpret the nature of production function.

B. Create a table and find out what are the five equations and five unknowns based on table-

that is reported in your text (pp.).

C. Solve these equations to get the solution to the model. Put your solution in the form of a Table

and explain the hiring rule of labor and capital based on graph of factor market equilibrium.

D. Estimate for the output per person in the long-run. Show it graphically. Explain why it follows

diminishing returns to scale.

E. Estimate TFP in the long-run, and explain TFP growth is crucial to make differences among

countries in terms of per capita GDP.

F. Point out the limitation of this model to explain long-run economic growth.

Suppose that a Demand Curve is given by QY = 10 – 5PY + PX Where QY is the quantity of the good, PY is the price of the good and PX pertains to the price of a substitutable good. The price of the substitutable good is K2. Suppose the price of the good is K1. Find the own price elasticity of demand? Find the cross-price elasticity of demand?

Using the supply function, you can get the quantity supplied if there is a

given price. Substitute the peso price in variable P and Multiply it by slope +10, the

available answer will be added to 0 (intercept). From here you will get the answer

10 quantity supplied. In the second example, the price of 5 is multiplied by 10. The

quantity supplied is 50.

if the price is higher than the origin what happened to the changes of quantity supply and quantity demand?

How to discuss a equilibrium reason?

Briefly explain the three (3) basic assumptions of indifference curves.

What is the equilibrium price of chicken burgers? Discuss your reason. 

The following table shows the daily supply and demand for chicken burgers at a sporting event:

Price (RM) Quantity demand (units) Quantity supply (units)

4.00 110 420

3.50 160 380

3.00 240 240

2.50 320 160

2.00 410 96

a) What is the equilibrium price of chicken burgers? Discuss your reason.

b) If the organizer of this sporting event decide to set the price at RM4.00, how many chicken burgers should be sold? Write your answer.

c) One of the burger stall in this sporting event is offering free fries for every 3 chicken burgers purchased but customers. Describe how does this offer may affect customers demand?

If the organizer of this sporting event decide to set the price at RM4.00, how many chicken burgers should be sold? Write your answer.

Briefly describe any four (4) factors that could result in a product having

an inelastic demand