Microeconomics Answers

Evaluate whether it violated or justify WARP conditionality: A consumer makes the

following choices (when you develop the matrix, show the calculation process for the first row)

a. At prices (p 1 ,p 2 )=($4,$4) the choice was (x 1 ,x 2 ) = (20,2).

b. At (p 1 ,p 2 )=($4,$2) the choice was (x 1 ,x 2 ) = (10,10).

c. At (p 1 ,p 2 )=($2,$4) the choice was (x 1 ,x 2 ) = (10,8)

Assume there is an increase in the price of the wood used in the production of kitchen tables. Illustrate and explain how this would impact the equilibrium price and quantity of kitchen tables.

Assume Thailand is a petroleum exporter on the global market. Draw the petroleum market in Thailand before and after international trade using a demand and supply graph (draw a graph), assuming the world price for petroleum is above the Thailand petroleum market before open for international trade. Identify and show (draw a graph) the change in consumer surplus, producer surplus, and total surplus seeing as Thailand is now open for international trade. Additionally, give some explanations for what happened.

• If an increase in the supply of water bottles leads to a 6 per cent decrease in the price and a 5 per cent increase in the quantity demanded, the price elasticity of demand for water bottles is 
• A. 0,6
•  B. 0,3
•  C. 0,83
•  D. 1,2

• Which one of the following statements is incorrect? 
• A. The price elasticity of demand is expressed as a ratio which is known as the elasticity coefficient.
•  B. When calculating the price elasticity of demand, one has to take the absolute value of the result.
•  C. If there are large fluctuations in price, the arc elasticity formula should be utilised.
•  D. If the elasticity coefficient is calculated at a particular point on the demand curve, it is called the arc elasticity.

A) Which firm has a dominant strategy? (2) What strategy should each firm follow? (2)

B) Assume that the game is to be played an infinite number of times. (Or, equivalently, imagine that neither firm knows for certain when rounds of the game will end, so there is always a positive chance that another round is to be played after the present one.) Would the tit-for-tat strategy would be a reasonable choice? Explain this strategy. (6)

C) Assume that the game is to be played a very large (but finite) number of times. What is the appropriate strategy if both firms are always rational? (4)

The pencil market is controlled by two firms: AAA Pencil Company and BBB Manufacturing. The structure of the market makes secret price cutting impossible. Each firm announces a price at the beginning of the time period and sells pencils at the price for the duration of the period. There is very little brand loyalty among pencil buyers so that each firm's demand is highly elastic. Each firm's prices are thus very sensitive to inter-firm price differentials. The two firms must choose between a high and low price strategy for the coming period. Profits (measured in thousands of Rands) for the two firms under each price strategy are given in the payoff matrix below.

 AAA - low price

AAA - high price

BBB - low price

60, 60

250, -20

BBB – high price

-20, 250

130, 130

Suppose LA.Banana employs workers to harvest bananas. Answer the following questions using the information provided below:

Quantity of labour:

1. 0 labour
2. 1 labour
3. 2 labour
4. 3 labour
5. 4 labour
6. 5 labour
7. 6 labour

Units of Output:

1. 0 banana
2. 16 banana
3. 21 banana
4. 25 banana
5. 31 banana
6. 36 banana
7. 40 banana

a.) Calculate the marginal product of labor, the value of the marginal product of labor, and the marginal profit ,suppose a fully competitive company, LA"Banana, where wages are fixed at $800 and each banana (output) sells for $20. 

In Thailand, a firm named SunFly is planning to monopolize its streaming services. The table below displays SunFly's monthly streaming service pricing as well as the quantity demanded for each pricing. 

Price (฿):

1. ฿ 130
2. ฿ 120
3. ฿ 110
4. ฿ 100
5. ฿ 90
6. ฿ 80
7. ฿ 70
8. ฿ 60
9. ฿ 50

Quantity demanded:

1. 10,000
2. 20,000
3. 30,000
4. 40,000
5. 50,000
6. 60,000
7. 70,000
8. 80,000
9. 90,000

a.) Calculate 1.total revenue, 2.average total revenue, 3.marginal revenue, 4.total cost, 5.average total cost, and 6.profit using the information given. (The firm has made a ฿3 million investment in their streaming offerings. In addition, the firm has faced a marginal cost of ฿10 for each streaming service it offers. )