Microeconomics Answers

Consider the Beiswanger Company, a small firm engaged in engineerng analysis. Beiswanger's president has estimated that the firm's output per month (Q) is related in the following way to the number of engineers € and technicians used (T): Q = 20E - E^2 + 12T - 0.5T^2 . The monthly wage of an engineer is $4,000, and the monthly wage of a technician is $2,000. President allots $28,000 per month for the combined wages of engineers and technicians. 

What will be the calculated MP^e?

Select one:

a. 10 - 2E

b. 20 - 2E

c. 30 - 3E

d. 16 - 3e

Diminishing marginal returns occurs when

Select one:

a. when the opportunity cost the extra output increases

b. when the opportunity cost the extra output decreases

c. output remains constant as more of variable factor is added to a fixed factor, output initially increases, then peaks before finally declining

d. output declines as more of variable factor is added to a fixed factor, output initially increases, then peaks before finally declining

Question 1: By re-stating the firm’s supply decision, we have the following:

Select one:

a. if at the best production level ‘q*’ greater than the average variable cost, then the firm should choose to produce ‘q*’

b. if at the best production level ‘q*’ greater than the average fixed cost, then the firm should choose to produce ‘q*’

c. if at the best production level ‘q*’ less than the average variable cost, then the firm should choose to produce ‘q*’

d. if at the best production level ‘q*’ greater than the marginal cost, then the firm should choose to produce ‘q*’

Global warming has had significant negative effects. But it has also had some positive effects. ln particular, wine-growing regions in several major producing countries have expanded, increasing the overall world supply of wine. But the demand for wine has also increased over this period. Use supply and demand curves to show what happens to price and quantity as a result of these two developments.

Exercise 2: Calculate consumer surplus for the demand curve P=1-Q and the supply curve P=1+Q 

Elas table pens What is the price elasticity of demand for pens in the price range R19 to R17?  

Given by the equations

                             (1)         Qd = 4 - P

                             (2)         Qs = -2+P           

a)    What is the price elasticity of the demand curve at the point of equilibrium?

b)    What is the price elasticity of the supply curve at the point of equilibrium?

Exercise: Suppose the demand curve is linear and is given by the equation P = a – bQ where P is price and Q is quantity. What is the consumer surplus if the equilibrium price is P* and equilibrium quantity is Q*?