Microeconomics Answers

Which one of the following is not a requirement for or a characteristic of perfect competition? 

• A. all market participants should have perfect knowledge of market conditions.
•  B. the good must be homogeneous.
•  C. there should be no government intervention.
•  D. every firm must have the power to set its price

A firm's marginal revenue (MR)

•  A. is equal to ΔTR/ΔQ.
•  B. is equal to the total revenue divided by the quantity sold.
•  C. is equal to the price of its product multiplied by the quantity sold
•  D. is equal to (TR – TC)/Q.

Suppose a consumer consuming two commodities X and Y has the following utility function X0.4 Y0.6. If price of good X and Y are 2 and 3 respectively and income constraints birr 50.

A/ Find the quantities of X and Y which Maximize utility

B/ Find the MRSxy

Imagine you are an economist, why will you do comparative statics analysis? What role do endogenous variables and exogenous variables play in comparative statics analysis?

Monthly demand and supply schedule for t-shirts are given by:

Price

8

7

6

5

4

3

2

1

Quantity Demanded

6

8

10

12

14

16

18

20

Quantity Supplied

18

16

14

12

10

8

6

4

Income

100

150

200

250

300

350

400

450

a)              What is the Price Elasticity of Demand for a price change from $7 to $5? Is it elastic or inelastic? (Use the Arc Elasticity Formula)

b)             What is the Price Elasticity of Supply for a price change from $7 to $5? Is it elastic or inelastic? (Use the Arc Elasticity Formula)

c)              Using Total Revenue, is demand elastic or inelastic for a price change from $4 to $3?

d)             What is the Income Elasticity of Demand for t-shirts when income decreases from $300 to $250? (Use the Arc Elasticity Formula)

40LK-10L²-5K²