Microeconomics Answers

Suppose that the XYZ Corp. (which is a profit-maximizing enterprise) produces “gadgets” according to the following production function: Q = 300K + 100KL + 2000L - L^2 , where Q is the number of gadgets per year, K is the amount of capital (machines) that are used, and L is the number of workers employed per year. Gadgets sell for $100 each.

a) If XYZ has 10 machines, and workers cost $100,000/year (including benefits and direct ancillary expenses), how many workers should XYZ hire?

b) If the workers cost $120,000, how many workers should XYZ hire?

c) If workers cost $100,000 but gadgets sell for $80 each, how many workers should XYZ hire?

d) If XYZ instead has 20 machines, how many workers should it hire when workers cost $100,000 and gadgets sell for $100?

Give an example of a price-setting firm and explain why you describe them in that way.

 For the price-taking “Baby Bell” firm, what is the equation of their individual demand curve?

The demand function for Product X is given by: Qd_x = 10 + 0.06I - 2P_x - 0.5P_y + 0.7P_z  where P_x  Price of good X $9.00 

P_y Price of related good Y  $4.00

P_z Price of related good Z $10.00 

I Income  $250.00 

a. (i) Calculate the own Price elasticity of demand (PED) for Good X.                           

Assume in a two-sector economy made up of agriculture and manufacturing, the government introduces a subsidy of y per hour on labour in the manufacturing sector. What will be the effect of the policy on the equilibrium wage, total employment as well as employment in agriculture and manufacturing?

Consider the following two-person simultaneous move game: column

left right up 7,3 a,a down a,a 7,3

row

Determine the Nash equilibrium/equilibria for any value of a.

b) Suppose 𝑎 = 4 will there be a Nash equilibrium in a sequential game? Assuming Column is the leader in this game show whether or not there is a Nash-equilibrium in this game

Assume the markets for cherries, muffins and tea are each perfectly competitive. (a) In the market for cherries, the equilibrium price is $1 per kilogram and the equilibrium quantity is 1000 kilograms. Calculate the price elasticity of supply if price increases to $1.20 causing the quantity supplied to increase to 1500 kilograms. 

Marginal rate of substitution indicates the slope of ........ *

Budget line

Price line

Indifference set

Indifference curve