Microeconomics Answers

Microeconomics

define diminishing returns

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Microeconomics

Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket. Her insurance company pays the remaining $80. (The insurance company recoups the $80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undertake.)

b. On your diagram, show the quantity of procedures demanded if consumers pay only $20 per procedure. If the cost of each procedure to society is truly $100, and if individuals have health insurance as described above, will the number of procedures performed maximize total surplus? Explain.

c. Economists often blame the health insurance system for excessive use of medical care. Given your analysis, why might the use of care be viewed as “excessive”?

d. What sort of policies might prevent this excessive use?

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Question #255149

Microeconomics

Question 4 (ILOs: B1, B3, C3, D4)

Batelco company estimates that the demand for their products is

Q = 500 - 3P + 2Pr + 0.1Y

Where Q = quantity, Pr is the price of its rivals, and Y is income (currently, P = $10, Pr = $20, and Y = $6000)

a. What is the price of elasticity of demand for Batelco?

b. What is the income elasticity of demand for Batelco?

c. What is the cross-price elasticity of demand between its products and its revival?

d. What is the implicit assumption regarding the population in the market?

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Question #255118

Microeconomics

In a particular city there are a number of fruit vendors selling bags of mixed fruit. Suppose that each vendor has a marginal cost of R1.50 per bag of fruit sold an no fixed cost. Suppose the maximum number of bags of fruit that any one vendor can sell is 100 per day. a) If the price of fruit is R2, how many bags does each vendor want to sell? b) If the industry is perfectly competitive, will the price remain at R2 for a bag if fruit. If not, what will the price be? c) If each vendor sells exactly 100 bags of fruit a day and the demand for the fruit from venords in the city is Q= 4400-1200P, how many vendors are there?

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Question #255117

Microeconomics

Mondi Company produces party boxes that are sold in bundles of 1000 boxes. The market is highly competitive with boxes currently selling for R100 per thousand. The company has a total and marginal cost curve given by: TC= 3 000 000+0.001Q² MC= 0.002Q Q is measured in thousand boxes bundles per year a) Determine Mondi's profit maximizing quantity? b) Calculate if the firm is earning a profit or loss? c) Based on the analysis above, should Mondi Company operate or shut down in the shortrun?

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Question #255114

Microeconomics

The Southern Mail produces local newspapers. The company can rent its equipment and hire workers at competitive rates. Equipment needed for this operation can be rented at R52 per hour and labour can be hired at R12 per worker hour. The company has allocated R150 000 for the intial run of newspapers. The production function using available technology can be expressed as Q= 0.25K⁰.²⁵L⁰.⁷⁵: a) Construct the isocost equation? b) Determine the combination of labour and capital to get the greatest output for an outlay of R150 000 for an intial run of newspapers. Determine the level of output? c) Graphically illustrate this using isoquant and isocost lines.

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Question #255101

Microeconomics

The southern Mail produces local newspapers. The company can rent its equipment and hire workers at competitive rates. Equipment needed for this can be rented at R4 per hour and labour at R3 per worker hour. The production function using technology can be expressed as Q= 2L⁰.⁵K⁰.⁵ . a) Determine the firm's optimal ratio of labour to capital b) Determine the cost minimizing level of capital and labour in the long run if the firm wants to produce 160 units. Calculate the cost c) Graphically illustrate this using isoquant and isocost lines

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Question #255088

Microeconomics

A student has a part-time job in a restaurant. For this she is paid $8 per hour. Her utility function for earning $I and spending S hours studying is U(I,S) = I^1/4 S^3/4 (The utility function is a measure of the `usefulness' or `worth' to the student of a certain combination of money and study time). The total amount of time she spends each week working in the restaurant and studying is 100 hours. How should she divide up her time in order to maximise her utility?

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Question #255086

Microeconomics

The weekly output (in units) of a factory depends on the amount of capital and labour it employs as follows: if it uses k units of capital (K) and l unit of labour (L) then its output is Q=L^0.5K^0.5 units. The cost to the firm of each unit of capital is $4, and the cost of each unit of labour is $1. Use the method of Lagrange multipliers to find the minimum weekly cost of producing a quantity of 200 units.

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Question #254997

Microeconomics

The demand function for Product X is given by:

Qdx = 10 + 0.06I - 2Px - 0.5Py + 0.7Pz

where

Px Price of good X $9.00

Py Price of related good Y $4.00

Pz Price of related good Z $10.00

I Income $250.00

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

(ii) Illustrate on a well labelled demand curve graph for Product X, the Total Revenue

earned when the Price of good X is equal to $9.00. This graph should be labeled

‘Graph 1: Total Revenue of Product X at price $9.00.’

(iii) Illustrate on another well labelled diagram, the area of Consumer surplus for Product X

when the price of good X is $9.00. This graph should be entitled ‘Graph 2: Consumer

Surplus of Product X.’

(iv) What is the value of the consumer surplus?

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