Microeconomics Answers

State (a) a positive economic statement of your choice, and then (b) a normative economic statement relating to your first statement.

A firm demand function for its output is p=400-0.5q. To maximize sales revenue,what price should be charged

Discuss the income and substitution effect of a price change in case of a normal good?

Q-2 Assume that the market for soaps in a small closed economy is initially characterized by the following domestic demand and domestic supply equations where Q is quantity and P is price.

Demand: Q = 120 – 2P & Supply: Q = 4P – 48. Find the equilibrium price, quantity, consumer surplus & producer surplus in the market for soaps.

suppose we are given a production function: q=[al^p +(1-a)k^p ]^1/p

Please show that MP_k=(1-a)(k/q)^p-1 and MP_l=a(l/q)^p-1

Please derive the RTS

Please derive the elasticity of substitution a.

Does this production function exhibit constant, increasing, or decreasing returns to scale?

suppose the production function for trucks is given by: q=kl+6l² -(1/3)l³

where q represents the weekly quantity of trucks produced, k represents weekly capital input, and l represents weekly labor input.

a. Suppose k = 45; at what level of labor input does this average productivity reach a maximum? How many trucks are produced at that point?

b. Again assuming that k = 45, at what level of labor input does the total production reach a maximum? How many trucks are produced at that point?

A firm estimated its AC curve last year and found that AC = 1000 – 0.05 Q. This year it estimated its ACs and found that they were AC = 900 – 0.05 Q Are there increasing or decreasing returns to scale?

Q = - 50 + 10 L – 0.02 L²

1) Find out MP

2) Find out AP

3) At what level of labor input does the AP curve reach its maximum? What is the MP at this input level?

1.Suppose an isoquant for a particular production process were so tightly curved that it was almost L-shaped. What would this imply about the technology?

2.Why is the TP of labor curve never downward sloping?

3.If MP is declining, is AP always declining? Why or why not?

A businessman uses K and L to produce X. Production function is: Q = 2K ( L – 2 )

PK = 600, PL = 300, TC = 15000

a) Determine marginal product function ( MP) of K and L. Determine MRTS

b) Determine Qmax

c) If he wants to produce 900 units, find out TCmin.