Microeconomics Answers

What information is embodied in an indifference curve and the budget line in the

work–leisure model? Draw an indifference map and budget line and locate worker’s

optimal position.

Given the demand for a product as Qd = 100 - 5P and the supply is given as Qs = -20 + 3p. You are told equilibrium is obtained at the point where Qd = Qs. The equilibrium price for the product is

When costs are at a minimum,

a)      the ratio of the MP_L/MP_K < P_L/P_K.

b)     MP_L = MP_K.

c)      the extra output we get from the last dollar spent on an input must be the same for all inputs.

d)     Price L = Price K.

• Is Industrial Economics different from Industrial Organisation? Justify your answer.

Below is a list of three (3) different markets. The market share of the firms in each market is given. Market A: 40%; 20%; 23%; 9%; 8%.

Market B: 26%; 24%; 23%; 27%

.Market C: 80%; 10%; 6%; 3%;1%. •

Calculate the 3-firm Concentration Ratio, CR(3) of each market. Interpret your results. •

Calculate the Herfindahl-Hirschman Index (HHI) of each market. Interpret your results. •

Which one of the two methods of market concentration above is more robust (accurate)? Justify your answer.

 Distinguish between Microeconomics and Industrial Economics.

• Explain the FIVE (5) categories or levels of industries.

• Discuss the technical factors that may be considered when making a decision on industrial location.

The conventional definition of the term ‘industry’ is a group of firms producing a single homogeneous product and selling it in a common market. However, the restriction of a single homogeneous product is not met in practice as most of the firms produce many outputs which may or may not be substitutable for each other. •

Discuss the operational meaning for ‘industry’ in the context of industrial economics. In your discussion, be mindful to clearly outline the different categories (levels) of industry in South Africa

• Explain why firms form mergers in South Africa. •

Using examples, discuss how the competition policies are beneficial to industries (markets) in South Africa

Productive efficiency is concerned with producing goods and services with the optimal combination of inputs to produce maximum output for the minimum cost. •

Discuss the two main components of productive efficiency. •

Compare and contrast the methods used by the society in making their economic decisions. 

Location theory has become an integral part of economic geography and spatial economics. It addresses questions of what economic activities are located where and why. Location theory basically assumes that firms and individuals act in their own self-interest as to maximize their profits and utility, respectively. •

Outline ANY THREE (3) technical factors that may be considered when making a decision on industrial location. •

Discuss the Market Area Theory (MAT) of Tord Polander.

Accounting profit equals