Microeconomics Answers

Consider a pure exchange economy of two individual A and B and two goods X and Y assume both the individual are endowed with two units of good X and 1 unit of good y each

Let utility function of individual A and B be Ua = min {Xa ,Ya} and Ub =min Xb/4,Yb}where xiand yi for i ={A,B} represent individuals consumption of good X and Y respectively . Determine the aggregate excess demand function for each good

Consider the following events: Scientists reveal that consumption of oranges decreases the risk of diabetes and, at the same time, farmers use a new fertilizer that makes orange trees more productive. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.

 A firm has a Cobb-Douglas production function given as

q=L^0.6K^0.2

Suppose that in the Short run, the mill’s capital (K) is fixed at 32 units and that it can only increase output q by increasing the amount of labour (L)

a. Determine the firms’ SR production function

b. If the firms’ competitive output price is ₵50 find its labour demand curve

c. How many workers does the firm hire if the wage rate is ₵15?

d. What is the MRPL between the 31st and 32nd worker who is hired at the competitive price?

 In a competitive market, firms sell output at a price of ₵ 20. Marginal productivity per hour of the workers is described by the equation MPL = 40 - L. What is the firm’s demand curve for Labour? If the firm can hire Labour from a competitive Labour market at a wage of ₵5 per hour, how many workers should the firm hire?

How does a competitive firm adjust its demand for Labour when the government imposes a specific tax of τ on each unit of output?

15. As a result of increased tensions in the Middle East, oil production is down by 1.21 million

barrels per day—a 5 percent reduction in the world’s supply of crude oil. Explain

the likely impact of this event on the market for gasoline and the market for small cars.

(LO1, LO3, LO5

With the help of well-labeled diagrams, compare the long run equilibrium of a firm under a perfectly competitive market structure and a monopoly market structure.

From the figures given below;

OUTPUT(UNITS) TOTAL REVENUE

50 750

60 840

70 910

80 960

90 990

100 1000

You are required to:

a) Calculate the average revenue [3 marks]

b) Calculate the marginal revenue [2 marks]

c) Draw the average revenue curve [2 marks]

d) Determine the market structure [1 mark]

e) Mention two features of the market structure in (d) [2 marks]