Microeconomics Answers

Q1. What is the formula for Equal payment series capital recovery amount?

(i) A = P(1+i)^n

(ii) F = A /(1+i)^n

(iii) P = t (1+i)^t

(iv) None of these

Q2. Which factor amount formula is applied to evaluate Present Worth Analysis.

(i) Equal payment series present worth analysis.

(ii) Equal payment series Compound amount.

(iii) Equal payment series capital recovery.

(iv) None of these

Q3. B : C ratio means what?

(i) Butter to chicken ratio.

(ii) Benefit to Cost ratio.

(iii) Benefit -cost ratio.

(iv) None of these

Q4. Which type of investment proposals are evaluated by applying B : C ratio?

(i) A start up

(ii) A private investment proposal

(iii) A MSME

(iv) A public investment proposal

Q5. Which factor amount formula is applied to evaluate Future Worth analysis?

(i) Equal payment series compound amount

(ii) Equal payment series present worth amount

(iii) Equal payment series capital recovery amount

(iv) None of these

Q1. What is the meaning of Internal rate of return (IRR)?

(i) It is the interest rate where PW =0

(ii) It is the interest rate where PW >0

(iii) It is the interest rate where PW<0

(iv) None of these.

Q2. What is the meaning of Internal rate of return (MARR)?

(i) Below this rate of return the investment proposal is not acceptable.

(ii) It is the marginal accepted rate of return.

(iii) It is the maximum accepted rate of return.

(iv) None of these.

Q3. What is an effective interest rate?

(i) It is nominal interest rate multiplied with time.

(ii) It is nominal interest rate divided with time.

(iii) R = (1+i/n)^n -1

(iv) None of these.

Q4. What is the correct formula of equal payment series compound?

(i) F= P (1+i)^n

(ii) F = A[ {(1+i)^n -1}/ i ]

(iii) F =(1+i)^n -In -1

(iv) None of the above.

Q5. What is the formula for equal payment series present worth amount?

(i) P = F/ (1+i)^n

(ii) P = r(1+t)^n

(iii) P = A [{(1+i)^n -1}/i(1+i)^n}]

(iv) None of the above.

Q1. What is the meaning of Present worth of an investment proposal?

(i) It is the present value of the principal investment.

(ii) It is the future value of principal investment.

(iii) It is the annual return of an investment proposal.

(iv) None of these.

Q2. What is the meaning of Future worth of an investment proposal?

(i) The future value of a principal investment.

(ii) The annual return.

(iii) The life of an investment proposal

(iv) None of these.

Q3. What is the meaning of a mutually exclusive investment proposals?

(i) A set of investment proposal with equal return.

(ii) A set of investment proposal with equal life.

(iii) A set of investment proposal with equal principal investment.

(iv) None of these.

Q4. What is the meaning of Annual Equivalent Worth of an investment proposal?

(i) It is the annual equivalent amount of cost.

(ii) It is the annual equivalent amount of revenue.

(iii) It is the annual equivalent amount of principal investment.

(iv) It is the net of annual equivalent amount of cost and revenue.

With the help of graphs, show how the following changes are going to affect the market

equilibrium. Considering the shifting factors of Gul Ahmed Clothing demand;

(a) The consumer is promoted, now earning better salary than before;

(b) J. clothing brand announces the 70% offsale on their entire stock for unlimited time period;

(c) A news channel announces that Eid is expected to be on Thursday in coming week;

(d) With an increase in global connectivity, now consumers are more inclined towards western

clothing.

The inverse of the demand and supply functions for shoes is given by the

following equations respectively:

Demand: P = 1400 - 2Qd

Supply: P = 200 + 1Qs

1.1. Calculate the equilibrium price and quantity of shoes.

(5)

1.2. Assume that the price of shoes is R700. Use your answer in 1.1 to explain

the resulting situation in the market for shoes, and how equilibrium will

be restored without government intervention, ceteris paribus.

(5)

Explain price discrimination. What are the conditions to make price discrimination effective? Provide your answers with examples from the Airline Industry.     

What is perfect competition

Q1. Martha is preparing for exams in economics and sociology. She has time

to read 40 pages of economics and 30 pages of sociology. In the same

amount of time, she could also read 30 pages of economics and 60 pages of

sociology.

(a) Assuming that the number of pages per hour that she can read of either

subject does not depend on how she allocates her time, how many pages

of sociology could she read if she decided to spend all of her time on

sociology and none on economics?

(b) How many pages of economics could she read if she decided to spend

all of her time reading economics?

You are the manager of a monopoly that faces an inverse demand curve described by P = 200 − 15Q. Your costs are C = 15 + 20Q. The profit-maximizing price is

a. $135

b. $110

c. $20

d. $290

You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's cost function is C = 60 + 4Q². Your firm's maximum profits are

a. 36

b. 40

c. 60

d. 80