Microeconomics Answers

the interest on own capital is

Analyse agricultural legislation which governs non-marketing agricultural activities

The general linear demand function for good X is estimated to be Q = 250000-500P-1.5 M – 240 PRWhere, P = price of good X, M is average income of consumers who buy good X, and PR   is the price of related good R. The values of P, M, and PR are expected to be $200, $60000 and $100.  Use these values at this point on demand to make the following computations.

1. Calculate the price elasticity of demand E. At this point on the demand for X, is demand elastic, inelastic, or unitary elastic? How would increasing the price of X affect total revenue? Explain  (5 Marks)
2. Calculate the income elasticity of demand EM. is good X normal or inferior? Explain how a 4 percent increase in income would affect demand for X, all other factors affecting the demand for X remaining the same. (5 Marks)

The ABC Company produces chemicals in a perfectly competitive market. The current market price is $20. The firm’s total cost is given by C=50+2Q+Q2.

a. Determine the firm’s profit maximizing output and profit. Write down the equation for the firm’s supply curve in terms of price P. (6 marks)

b. Complying with more stringent environmental regulations increases the firm’s fixed cost from 50 to 100. Would this affect the firm’s output? Its supply curve? (4 marks

Q4) a) Assuming that food is a normal good up to a certain level of income, show that an increase in price would

induce the substitution and income effects to move in the same directions. What would be the total effect on the

quantity of food.

b) Assuming that food is inferior up to a certain level of income, show that an increase in price would induce the

substitution and income effects to move in the opposite directions. What would be the total effect on the quantity of

food.

Q3) Explain how the concepts of isoquant and isocost curves can be used to determine the equilibrium of a

producer.

Q2) With the help of diagrams explain the following that whether these are false or true regarding the indifference

curves.

a) Indifference curves are positively slope.

b) Indifference curves can intersect.

c) Indifference curves are concave to the origin.

Why was agriculture sector declared as a critical industry

Micro and macro planning and how they can be applied

Q7) Answer the following questions making the comparisons between the perfectly competitive and monopoly

firms.

a) Differentiate both with respect to market, nature, resource mobility price information and demand curves.

b) Looking at the short run and long run conditions is it possible for a perfectly competitive firm to survive in the

long run with zero profits? Explain your answer with reason (s).

c) Looking at the short run and long run conditions is it possible for a monopoly firm to survive in the short run

with losses? Explain your answer with reason (s).