Microeconomics Answers

The demand curve facing a monopoly is P= 100 +5Q. The firm cost is c(Q)=10+5Q. What is profit maximising output?

Mulaudzi liquor operates in a competitive industry to produce alcohol at a constant marginal cost of R28 per unit. Immediately when the industry is monopolized, marginal cost rise to R35 per unit because of the R5 per unit must be paid to lobbyists to ensure that only Mulaudzi firm receive liquor license

Qd=1300-15P

And Marginal revenue curve by

MR= 15-Q/10

a) Calculate the monopoly quantity

Consider a person who

consumes water and bread, deriving utility by xy if x is the amount of water consumed and

y is the amount of bread consumed. Suppose this person's income is Rs. 10, the unit

price of bread is Rs. 3 and the unit price of water facing this person is Re. 1. The price of

water incorporates a per unit subsidy of Re. 1, i.e., for every unit of water consumed by

this person, she pays Re. 1 to the water supplier and the government pays Re. 1 to the

water supplier. Suppose this person's demand is (x0, y0). ,If the government provides this person a lump-sum income subsidy that exactly offsets 

her utility loss on account of removal of the water subsidy, then the required lump-sum 

subsidy is

What are the reasons behind a firm experiencing economies of scale first, followed by

diseconomies of scale?

‘If an input is inferior, its marginal product must be negative.’ Comment.

(e) What output should farmer 1 produce if he/she expects their rival to produce 20 units? [4] (f) Calculate the profits if farmer 2 decides to break the cartel agreement [4] (g) Does joining a cartel offer any benefits to both farmers? Justify your answer [4] (h) What if farmer 1 is a leader and farmer 2 a follower, determine the price, quantity and profits made by these two farmers. [8] 

Two dairy farmers produce milk for a local town with local milk demand given by (P denotes price measured in Rands, Q denotes the quantity measured in liters). Both farmers have the same cost function given by (where denotes output). (a) Determine the reaction function of each farmer. [8] (b) Find the Cournot-Nash equilibrium. [2] (c) Calculate profits for each farmer [2] (d) Suppose that both farmers decide to form a cartel, determine profits for each farmer under the cartel 

From the following total utility schedule

Qx 0 1 2 3 4 5 6 7

TUx 0 4 14 20 24 26 26 24

a. Derive the marginal utility schedule.

b. Plot the total and the marginal utility schedules.

c. Determine where the law of diminishing marginal utility begins to operate.

d. Find the saturation point.

comsumer consuming two goods x and y has utility function v=x➋+y➌.If the price of the two commodities 6 and 2 respectively and his budget is birr .40 find the quantites x and y which will maximize utility