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Discuss the following statement: “Since supply and demand curves are always shifting due to various demand and supply-side disturbances, markets never actually reach an equilibrium. Therefore, the concept of equilibrium is useless.”
Why do economists undertake comparative statics analysis? What role do endogenous variables and exogenous variables play in comparative statics analysis?
Differentiate between an exogenous variable and an endogenous variable in an economic model? Why isn’t it useful to construct an economic model that contains only exogenous variables (and no endogenous variables)?
Suppose there is a covered bowl with 3 red balls and 6 other balls, which could be black or yellow. The Decision Maker [DM] doesn’t know how many black or yellow balls there are, other than there are 6 in total. The DM will choose one ball from the bowl; each ball is equally likely to be chosen. The DM is offered a choice between Option A, which pays off LKR1000 if a red ball is drawn (0 otherwise) or Option B, which pays off LKR1000 if a black ball is drawn (0 otherwise). The DM is then offered a choice between Option C, which pays off LKR1000 if a red or yellow ball is drawn (0 otherwise), or option D, which pays off LKR1000 if a black or yellow ball is drawn (0 otherwise).
Find the expected utility basics of the theory of expected utility.
Comparative advantage and absolute advantage in the Philippines, 5 examples of each using your own words.
The market determined price in a perfectly competitive industry is P = Rs. 10. Suppose that the total cost equation of an individual firm in the industry is given by the expression
TC 1000+2Q+0.01Q2
a) What is the firm’s profit-maximizing output level and profit? Is this profit normal profit or supper normal profit? Justify your answer (10 marks)
b) At profit maximizing level what is firm total cost, total revenue and marginal cost (10 Marks)
c) Why does a competitive firm is considered as a price taker and Monopoly firm as a price maker (05 Marks)
You are a member of Board who chairs an ad committee of reforming taxes on telecommunication services. The local telecom tax es can amount to as much as 25 percent of a consumer’s phone bill. The high rates on telecom services have become quite controversial, due to the fact that the deregulation of the telecom industry has led to a highly competitive market. Your best estimates indicate that, based on current tax rates, the monthly market demand for telecommunication services is given by Q=250-5P and the market supply (including taxes) is Q=4P+110 (both in million). The Board of management is considering tax reform that would dramatically cut tax rates, leading to the supply function under the new tax policy of Q=4.171P+110. How much money would typical consumer save each month as a result of proposed legislation?
1. If a firm in a perfectly competitive industry raises its price above the market price.......
2.A monopoly is.....
Suppose a consumer consuming two commodities X and Y has the following utility function U= X0.4Y0.6. If price of good X and Y are 2 and 3 respectively and income constraint is Birr 50, then find
Find quantities of X and Y which maximize utility
Show how the rise in income to Birr 100 will affect the quantities of X and Y
