Microeconomics Answers

Assume a firm engaging in selling its product and promotional activities in monopolistic

competition face short run demand and cost functions as Q = 20-0.5P and TC= 4Q2

-8Q+15,

respectively. Having this information (5 marks)

a) Determine the optimal level of output and price in the short run.

b) Calculate the economic profit (loss) the firm will obtain (incur).

c) Show the economic profit (loss) of the firm in a graphic representation.

Sketch and explain the demand relationship in each of the following statements.

a) I would never buy donkey meat! You couldn’t even give me one for nothing or

for free.

b) I like canned fish and if the price falls to N$2 per can, I’ll buy out the entire

stock of the Neudamm Campus tuck-shop.

c) Regardless of the price, the quantity demanded of fat-cake by students at

Sam Nujoma Campus doesn’t change.

6.) Use a diagram to illustrate how each of the following events affects the equilibrium

price and quantity of Mexican pizza in Namibia.

a) The price of mushroom rises. Mushroom is the main in Mexican pizza.

b) The health hazards of hamburgers are widely publicised. Hamburgers are

substitute of pizza.

c) The price of tomato sauce falls. Tomato sauce is compliment to Mexican

pizza.

d) The incomes of consumers rise and Mexican pizza is an inferior good.

e) Consumers expect the price of Mexican pizza to fall next week.

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The perfectly competitive firm has a perfectly elastic demand curve. Is this statement true or false? Explain your answer. 

Consider the following utility function belonging to “Consumer A”.

U^A(x,y,z,v) = x^0.1y^0.2z^0.3v^0.4.

Suppose that prices of x, y, z and v are 1$, 2$, 3$ and 4$. The consumer’s income is 10$.

a. Find the values of x, y,z and v that maximize the consumer’s utility subject to his/her budget constraint.

b. Suppose that “Consumer B” has a utility function which is a logarithmic transformation of the consumer A’s utility function, i.e.

 U^B =ln U^A.

Suppose that prices and income are the same. Would the amounts of x, y, z and v consumed by “Consumer B” be the same as the amounts consumed by “Consumer A”?

Dimi has the following utility for goods x and y:

u(x,y) = x^2 + 2x + 1 - y

The marginal rate of substitution between the two goods is...

a) 2

b) 2x-2

c) 2x+2

d) -2x+2

Using arc method calculate the elasticity of demand for oranges when the price rises from $2 to $3 Price per orange, its demand reduces from 80 thousands oranges to 70 thousands oranges. Interpret your answer in term of the farmer’s revenue

A survey by Namibian Statistic Agency (NSA) indicated that kapana is Namibians’ favourite. For each of the following, graphically indicate the possible effects on demand, supply, or both as well as equilibrium price and quantity of Kapana.

a) A severe drought in Namibia causes farmers to reduce the number of cattle in their herds by a third-quarter of their stock. These farmers supply beef that is used for kapana meat at Single Quarter Open Market. b) A new report by the Veterinary Council of Namibia reveals that kapana does, in fact, have significant health benefits c) The discovery of cheaper animal feed by Neudamm Bush-To-Feed that lowers the price of cattle. d) New technology that lowers cattle’s costs of producing

Consider a couple decision about how many children to have. Assume that over a life time a couple has 200000 hours of time to either work or to raise children. The wage is $10 per hour. Raising a child takes 20000hours of time.

a. draw a budget constraint showing the trade off between lifetime consumption and the number of children ignore the fact that children come only in whole numbers. show indifference curves and an optimum choice.

b. Suppose the wage increases to $12 per hour. Show how the budget constraint shifts. Using income and substitution effects, discuss the impact of the change on the number of the children and lifetime consumption.

c. We observe that as a society that, as societies get richer and wages rise, people typically have fewer children. Is this fact consistent with this model. Explain

Assume Demand equation of a product as Q = 70 -10 P + 4Pr + 50 I

Where

Q = Quantity of the product demanded, P = Price of the product (in $),

Pr = Price of the related product (in $) and I = Per capita income (in ‘000)

a.     State the key steps for analyzing the above demand equation and calculate the regression results.

b.     What are the implications of the above regression analysis for management decisions?

literature review on the public sector wage bill as an expenditure control- experience of other nations with similar problems discuss how they dealt with the problem?, critically analyses if the approach can be done in SA?