Microeconomics Answers

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

Suppose the cost function is C(Q) = 50 + Q − 10Q² + 2Q³. At 10 units of output, the average cost curve is

a. at the maximum level.

b. in the declining stage.

c. in the increasing stage.

d. at the minimum level

Suppose the cost function is C(Q) = 50 + Q − 10Q² + 2Q³. What is the marginal cost of producing 10 units?

a. $560

b. $1,010

c. $401

d. $1,060

If the price of good X is $10 and the price of good Y is $5, how much of good X can the consumer purchase if her income is $15 and she spends it entirely on purchasing good X?

a. 1.5

b. 0

c. 3

d. 2

True, False, or Uncertain. To have any credit you should justify your answer and support

it with the proper graph.

a. Consumers pay more of a per bottle tax on beer, the more elastic is the demand curve for beer. [8 points]

b. Effective rent control makes everyone who is affected better off. [7 points]