Microeconomics Answers

a)   What is the percentage change in the real price (1990 dollars) from 1980 to 2000? Compare this with your answer in (b). What do you notice? Explain.

I have given my answers for the following questions. Can you checkout whether the answers are correct or not?

1.How is Demand and Marginal Revenue in perfect competition different from monopoly?

My answer: In perfect competition, Demand and Marginal Revenue are equal to the price. In monopoly this is not the case because the monopolist wants to lower the price on all units in order to sell additional units. This makes it so the marginal revenue is less than the price and its curve has a more negative slope than the demand curve. 

2.What does the demand curve for a perfectly competitive individual seller look like? Explain the logic behind it.

Answer: The demand curve for an individual firm is equal to the equilibrium price of the market means it is a horizontal line. In a perfectly competitive industry, the firm's demand curve is downward sloping. The perfectly competitive model does not assume any knowledge on the part of individual buyers and sellers about market demand and supply—they only have to know the price of the good they sell

1. Using the marginal analysis for an individual perfectly competitive firm, demonstrate graphically the profit maximizing point. Would this firm experience positive economic profit? Why or why not? (Can u explain a little bit?)

2. How is Demand and Marginal Revenue in perfect competition different from monopoly? 

3. What does the demand curve for a perfectly competitive individual seller look like? Explain the logic behind it.

Thank you

If an increase in consumer income lead to no change in the demand of a product then the product is what?

An increase in the price of a product if demand is downward sloping will lead to

1.  After levying tax on consumers, new supply and demand curve given as Qs=P. Qd=100-(P+T). (Qd stands for quantity demanded, Qs quantity supplies, P is price, T is tax on consumers.

What is unit tax amount T when maximizing government tax revenue?  

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?