Microeconomics Answers

Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. An accountant would calculate the total cost for one birdhouse to be

A. $5

B. $8

C. $9

D. $13

The effect of taxes on economic well being is measured comparing the

A. Benefit to buyers with the loss to sellers.

B. Price paid by buyers to the price received by sellers.

C. Profits earned by firms to the losses incurred by consumers.

D. Decrease in total surplus to the increase in revenue raised by the government.

Suppose you have an economy of two individuals’ ad two goods.When is the allocation of goods said to be Pareto Optimal?Thoroughly illustrate and explain the concept of optimality using an Edgeworth box.Economists often argue that a trade-off exists between efficiency and equity, with reference to the Edgeworth box used in 2 support these claims.For resource allocation to be deemed efficient within an economy, three conditions must be meet. State and explain these three conditions.

Multichoice company broadcasts to subscribers in Lusaka and Solwezi. The demand for each of these two groups are QSZ = 50 – (1/3) PSZ and QLSK = 80 – (2/3) PLSK, where Q is in thousands of subscriptions per year and P is the subscription price per year. The cost of providing Q units of service is given by C (Q) = 1000 + 30Q, where Q = QSZ + QLSK. Assuming Multichoice is a Monopoly and can engage in third-price discrimination, thenWhat is the profit-maximizing price and quantity in Solwezi Market?What is the profit-maximizing price and quantity in Lusaka Market?Suppose the Monopoly can only charge a single. What price should it charge and what is the total quantity sold?

Kanoso is the sole owner of a nail salon. Her costs for a manicure are given byTC = 10 + Q2 Where TC is the Total Cost and Q is the number of manicures.The nail salon is open only 2 days a week – Tuesday and Thursday. On both days Kanoso acts as a price taker, but price is much higher on Tuesday. Specifically, P = K10 on Tuesday and P = K20 on Thursday.Calculate how many manicures Kanoso will perform on each day.Calculate Kanoso profits on each day.The National Association of Nail Salons has proposed a uniform pricing for all its members. They must always charge P=K15 to avoid the claim that consumers are being ripped off on Thursday. Should Kanoso join the association and adhere to pricing regulations? (Quantitatively justify your answer)

Suppose economy is in equilibrium at point E, Now if for some reasons there is shortage or surplus in economy, how an economy will again attain equilibrium. Explain with the help of an example

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?