Microeconomics Answers

1. Gorgeousleny with an income of P150 would like to buy two goods. Let us say juice and bread. Price of juice is P12 and price of bread is P6. If gorgeousleny will buy the ist 5 juices she is entitled to a 50% off. Draw the graph.

After a week gorgeousleny went back to the store and will still buy her two favorite goods with the same income of P150 and price of bread and juice is constant. but this time the promo of 50% off is applied after the ist 5 juices. Draw the graph. .

a. ) Measure the qty. of bread on the vertical axis and the qty. of juice on the horizontal axis. Label both graph with its corresponding points, pt. A for bread and point B for juice. the combination of bread and juice label it as point C.

b.) For both graph, What is the slope from point C to point B? ; What is the slope from from point A to point C?  

6. Explain the effect on the production of ice cream, if the price of raw milk decreases.

7. Explain why government applies sin taxes on goods that are bad for your health (and addictive), for example alcohol and cigarettes.

You are the manager of a firm that produces and markets a generic type of soft drink in a competitive market. In addition to the large number of generic products in your market, you also compete against major brands such as Coca-Cola and Pepsi. Suppose that, due to the successful lobbying efforts of sugar producers in the United States, Congress is going to levy a $0.50 per pound tariff on all imported raw sugar—the primary input for your product. In addition, Coke and Pepsi plan to launch an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks. How will these events impact the equilibrium price and quantity of generic soft drinks?

Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smart phones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With an annual overhead costs and operating expenses amounting to $145000. Jamie expects a profit of 20 percent. This margin is 5 percent larger than of her largest competitors, Apps. Inc.

a. If Jamie decides to embark on her new venture, what will her accounting cost be during the first year of operation? Her implicit costs? Her opportunity cost?

b. Suppose that Jamie’s estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn positive accounting profits? positive economic profit?

Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smart phones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With an annual overhead costs and operating expenses amounting to $145000. Jamie expects a profit of 20 percent. This margin is 5 percent larger than of her largest competitors, Apps. Inc.

a. If Jamie decides to embark on her new venture, what will her accounting cost be during the first year of operation? Her implicit costs? Her opportunity cost?

b. Suppose that Jamie’s estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn positive accounting profits? positive economic profit?

You are the manager of a midsized company that assembles personal computers. You purchase most components—such as random access memory (RAM)—in a competitive market. Based on your marketing research, consumers earning over $80,000 purchase 1.5 times more RAM than consumers with lower incomes. One morning, you pick up a copy of The Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce RAM at a higher unit cost. Based on this information, what can you expect to happen to the price you pay for random access memory? Would your answer change if, in addition to this change in RAM input prices, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession? Explain. (LO1, LO3, LO5)

You are the manager of a midsized company that assembles personal computers. You purchase most components—such as random access memory (RAM)—in a competitive market. Based on your marketing research, consumers earning over $80,000 purchase 1.5 times more RAM than consumers with lower incomes. One morning, you pick up a copy of The Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce RAM at a higher unit cost. Based on this information, what can you expect to happen to the price you pay for random access memory? Would your answer change if, in addition to this change in RAM input prices, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession? Explain. (LO1, LO3, LO5) 12. You are the manager of a firm that produces and markets a generic type of soft drink

Questions to be ask while interviewing an startup owner

Three questions related to economic unit and strategies to deal with competition and to be in long run.

Three questions related to unit economic and break even point .

Two questions based on cost curve.