Microeconomics Answers

what are welfare payments or consumer subsidies? what is the south african government providing and to whom? what are the costs and consequences of providing then subsidies and welfare? are there any welfare or subsidy payments that's should be reviewed or added? are there current subsidy or welfare issues that are being discussed or addressed in parliament

Conclusion As a response to Covid-19 the SARB cut its benchmark interest rate to a low record. In the last meeting held on the 25^th March 2021, the South African reserve bank’s Monetary Policy Committee (MPC) announced that interest rates would remain stable at 3.5 percent and the prime lending rate at 7 percent. This was largely in line with Economist's expectations.

state if the statement is true, false or uncertain.

1.     If a firm has production function q = L^0.3K^0.7   and input prices are constant then the marginal cost is less than the average cost.
2.    If a firm has a production function q = L^0.4K^0.8 then the marginal cost is equal to the average cost..
3.     In case a production function is subject to constant returns to scale , diminishing marginal productivity implies that more of one input raises the marginal product of the other input.
4.     If over time the ratio of expenditure of labour to capital rises, then it must be the case that the ratio of units of labor to capital used in production also rises.

Consumption 

1. Explain what is meant by the permanent income hypothesis.
2. With reference to the permanent income hypothesis, distinguish between transitory income and permanent income.
3. With reference to the permanent income hypothesis, distinguish between transitory and permanent consumption.
4. With reference to the permanent income hypothesis, identify an example of positive transitory income.
5. With reference to the permanent income hypothesis, identify an example of negative transitory income.
6. With reference to the permanent income hypothesis, identify an example of positive transitory consumption.
7. With reference to the permanent income hypothesis, identify an example of negative transitory consumption.
8. With reference to the permanent income hypothesis, identify an example of positive transitory income

As a response to Covid-19 the SARB cut its benchmark interest rate to a low record. In the last meeting held on the 25th March 2021, the South African reserve bank’s Monetary Policy Committee (MPC) announced that interest rates would remain stable at 3.5 percent and the prime lending rate at 7 percent. This was largely in line with Economists expectations. What would be the effect of the decision on property price. Is there a possibility of a property bubble? 

For inferior goods, as the price rises

 Given the following production plan for a firm in the short run.  

i.At what point is the firm’s Marginal Physical Product (MPP) Maximum? (5 Marks) ii.Calculate the levels of Average Physical Product (APP) and Marginal Physical Product (MPP) at  each input level. (20 Marks)

X 

Y 

APP 

MPP

0 

1 

5

2 

11

3 

16

4 

20

5 

23

6 

25

7 

26

8 

26

9 

25

With the aid of a clearly labeled diagram, illustrate the difference between; i.A competitive firm making abnormal profits and subnormal profits (10 marks) ii.A monopolist making normal profits and supernormal profits (10 Marks) iii.What are the conditions for profit maximization? (5marks) 

A competitive firm is producing the level of output that maximizes its profits. Subsequently, its variable costs decrease. To maximize profits, the firm should

A) decrease its output. B) shut down.

C) not change its output. D) increase its output.

With graphical illustrations of the market structures, explain

a) the case of profit maximizing firm in the short run

b) the case of a loss making Monopolistic competitive firm in the long run