Microeconomics Answers

(a)    Suppose widgets have a price elasticiy of demand equal to -1.95 and a cross elasticity of demand equal to 2 with dundles. What are the pricing options for a firm that sells widgets? Explain.

(b)   If the quantity demand for apples is given by:

                                                    Q_D = 300 − 2.55p_A + 7.62p_B + 0.75Y            

if p_A = 90 cents, p_B = 50cents and Q_D = 860.

Calculate and interpret the income elasticity of demand for apples.

1.   We assume a firm's production is determined on two inputs, capital(K) and labour(L).

(a)    Suppose that a firms out put is given by: q = αLK²          

Where α is a productivity factor.

i. Specify the marginal products of labour and capital.

If the cost function is C = wL + rK. Specify the quantites of capital and Labour that minimize costs

1.   We assume a firms production is determined on two inputs, capital(K) and labour(L).

(a)    Explain the following terms using a diagram.

i.        A Cobb-Douglas production function

ii.      Isoquants and Isocosts

iii.   The long-run equilibrium

(b)   Suppose that a firms out put is given by:

q = αLK²                                                                                       

1.   The structure of a market is determined by certain characteristics such as the number of buys and sellers, long-run profits, nature of demand curve, possibility of collusion e.t.c.

(a)    Use the characteristics of a perfectly competitive market to explainwhy the demand curve for a firm in perfectly competitive market is perfectly elastic.

(b)   Mathematically prove that for an market structure, the profitmaximizing level of output is obtained at the point where the marginal cost is equal to marginal revenue i.e. MC = MR.

(c)    if TC = 3 + Q² and demand is.

Calculate the firm’s total profit.

(a)    Suppose widegts have a price elasticiyt of demand equal to -1.95 and a cross elasticitiy of demand equal to 2 with dundles. What are the pricing options for a firm that sells widgets? Explain. (5 marks)

Describe the equilibrium condition of a consumer who consumes Kenkey and fish when faced with a given income and relative prices of the goods.

Starting from equilibrium,how would the consumer respond to:

i.Arise in the price of kenkey?

ii.A fall in the price of fish?

Suppose that BJP imposes a tariff on imported autos to protect Indian auto industry from foreign competition. Assuming that India is a price taker in the world auto market , shown on a diagram : change in quantity of imports, loss of Indian consumers, gain to indian manufacturers, government revenue, dead weight loss associated with tariff.