Microeconomics Answers

Nimbus, Inc., makes brooms and then sells them to customers. Here is the relationship between the number of workers and Nimbus's output in a given day:

Workers:

1. 0 worker
2. 1 worker
3. 2 workers
4. 3 workers
5. 4 workers
6. 5 workers
7. 6 workers
8. 7 workers

Output:

1. 0 broom
2. 20 brooms
3. 50 brooms
4. 90 brooms
5. 120 brooms
6. 140 brooms
7. 150 brooms
8. 155 brooms

a.)Marginal product / b.)Total cost / c.)Average Total cost / d.)Marginal cost:

1. ?
2. ?
3. ?
4. ?
5. ？
6. ？
7. ？
8. ？

a.)  Construct the marginal-cost and average-total-cost curves for Nimbus. Explain diminishing marginal product and explain when does Nimbus experience diminishing marginal product using the cost curves below.

Assume that Smith consumes good X and his total utility function of good X is given by: 𝑇𝑢𝑥 = 30𝑋2 – 0.5𝑋3 I. Obtain 𝑀𝑢𝑥 and 𝐴𝑢𝑥 functions.

II. At what level of good X, 𝑀𝑢𝑥 will be maximum?

III. Find the value of total utility where 𝑀𝑢𝑥 is maximum.

IV. From what level of good X, law of diminishing marginal utility will start to operate?

V. Find the value of good X where 𝑀𝑢𝑥 curve cuts the 𝐴𝑢𝑥 curve at its maximum.

VI. At what level of good X, 𝑀𝑢𝑥 𝑒𝑞𝑢𝑎𝑙 𝐴𝑢𝑥 . What is their values at this unit of good X.

VII. How many units of good X, he should consume to get the maximum satisfaction? What is the maximum value of total satisfaction at this point?

VIII. Frome what unit of good X, 𝑀𝑢𝑥 become negavtive?

IX. Estimate the value of 𝐴𝑢𝑥 𝑤ℎ𝑒𝑛 𝑀𝑢𝑥 is maximum?

X. Draw the 𝑇𝑢𝑥 , 𝑀𝑢𝑥 and 𝐴𝑢𝑥 curves on a graph and indicate the above all values on the graphs.

Suppose that Jane spends his entire income on good X and Y. The marginal

utilities of both good X and Y are independent of the amount consumed of other

good. The price of X is $2 per unit of X and the price of Y is $3 per unit of Y.

A distribution of the total utilities of goods X and Y consumed is given below.

Distribution of Total Utilities for Good X and Y for Jane.

Number

of Units

Consumed

Total Utility for X Total Utility for Y

1 20 24

2 38 45

3 54 63

4 68 78

5 80 87

6 90 90

Provided Mr. Jane has a monthly income of $ 24. How many units of

Good X and Good Y should Mr. Jane buy?

A monopolist firm has the following total cost function and demand function and show your calculation.

Quantity demand price total cost

5 8 20

6 7 22

7 6 25

8 5 29

9 4 34

10 3 40

Explain what price will be charged and what output will be produced.   

The wage rate of labor is Rs. 6 and price of capital is Rs. 2. The marginal product of labor is 16 while marginal product of capital is 4. Can a firm be operating at equilibrium?       

Q9) Complete the table and show your calculation

No. of variable inputs Total product Marginal product Average product of

of variable input variable input

3 18 30

4 20

5 130

6 5

7 19.5

Does the production function stated in the table given above exhibit diminishing returns? If so, at what no. of units of variable inputs do diminishing marginal return begin?

A monopolist firm has the following total cost function and demand function and show your calculation.

Quantity demand price total cost

5 8 20

6 7 22

7 6 25

8 5 29

9 4 34

10 3 40

Explain what price will be charged and what output will be produced.     

You are the manager of a firm that receive revenue of Rs.30,000 per year from product X

and Rs. 70,000 per year from product Y. The own price elasticity of demand for product X

is -2.5 and the cross price elasticity of demand between product Y and X is 1.1. How much

will you firm’s total revenue (revenues from both products) change if you increase the price

of good X by 1 present?