Microeconomics Answers

An employer has dedicated considerable resources to the training of an employee, but after a year, he finds the employee’s performance not up to the mark. He is thinking of letting the employee go but is hesitant because of the cost he has incurred in the training. What will your advice to the employer be?

Distinguish between substitutes and complements using cross price elasticity coefficients to motivate your answer.

Suppose the price of Fanta falls from R18 to R14 per bottle, and the quantity demanded rises from 250 to 400 bottles a day. 

Calculate the price elasticity of demand using the point elasticity formula and

Comment on the behaviour of demand for Fanta, based on the price elasticity of demand calculated in 1.1.1 above 

The manager of a Cape Town superette carries a stock of jive soft drinks. The country has experienced an economic recession which yields an anticipated income decrease of 6%.

As a result, the income elasticity of demand for this product is estimated to be - 2.5.

Calculate the percentage change in the quantity of your soft drink orders to accomodate the new demand without a surplus or shortage of inventory.

How the family farm utilize the limited resources to fulfill their needs in simple economy

Tropical Cable and Conductors Ltd can sell x items per day at a price of p GH¢ each, where  

p =125 – 5x/3 . The cost of production for x items is 500 + 13x +0.2x²

1.    Find the marginal cost function and the total revenue function

2.    Find how much they should be produced to have a maximum profit.

3.    Assuming that all items produced can be sold. What is the maximum profit?

4.    How much should be produced to breakeven?

5.    Calculate the price that maximizes profit.

6.    Compute the price elasticity of demand for the firm’s product at the profit maximizing output level.

7.    As a consultant advise the firm on its pricing policy.

8.    The government imposes a per unit tax on the firm, calculate:

a. the new profit maximizing level of output.

b. the new maximum profit.

What are some areas where it makes more sense that households might optimize and where might they satisfice instead? What factors about a given choice do you think might influence how close a household comes to economically-rationally optimization?

Love Econ shoes factory has the total cost function of 𝑇𝐶(𝑠)=500+3𝑠+5𝑠2.

Please complete the following:

(a) Total Variable Costs:

(b) Total Fixed Costs:

(c) Average Variable Costs:

(d) Average Fixed Cost:

(e) Average Total Costs:

(f) Marginal Costs:

(g) At what amount of output is average total cost minimized?

(h) Draw total fixed cost curve when Love is producing 300,000 units of shoes.

Remaining Question of Mini Case study salmon (trout) fishing

Good weather shifts in supply

Price per pound | Quantity supplied in 1999 | Quantity supplied in 2000 | Q.Demanded

$2.00 80 400 840 

$2.25 120 480 680

$2.50 160 550 550

$2.75 200 600 450

$3.00 230 640 350

$3.25 250 670 250

$3.50 270 700 200

A). Draw a demand and supply model representing the situation before the economic event took place.

B). Decide whether the economic event being analyzed affects demand or supply.

C). Decide whether the effect on demand or supply causes the curve to shift to the right or to the left, and sketch the new demand or supply curve on the diagram.

D). Identify the new equilibrium and then compare the original equilibrium price and quantity to the new equilibrium price and quantity.

E). What does those numbers mean exactly?

Mini Case Study

salmon (trout) fishing

Good weather shifts in supply

In the summer of 2000, weather conditions were excellent for commercial salmon fishing off the California coast. Heavy rains meant higher than normal levels of water in the rivers, which helped the salmon to breed. Slightly cooler ocean temperatures stimulated the growth of plankton—the microscopic organisms at the bottom of the ocean food chain—providing everything in the ocean with a hearty food supply. The ocean stayed calm during fishing season, so commercial fishing operations did not lose many days to bad weather. How did these climate conditions affect the quantity and price of salmon?

Dear Sir/Ma'am remaining part of this Case Study in next question