Microeconomics Answers

5. Consider the demand and supply functions for the notebooks market.

𝑄𝐷=10,000−100𝑝 𝑄𝑆=900𝑝

a. Make a table with the corresponding supply and demand schedule.

b. Draw the corresponding graph.

c. Is it possible to find the price and quantity of equilibrium with the graph method?

d. Find the price and quantity of equilibrium by solving the system of equations.

6. Supply and demand functions show different relationships between the price and quantities supplied and demanded. Explain the reason for that relation.

1. Consider the market supply curve which passes through the intercept and from which the market equilibrium data is known, this is, the price and quantity of equilibrium 𝑷𝑬=𝟓𝟎 and 𝑸𝑬=𝟐𝟎𝟎𝟎.

a. Considering those two points, find the equation of the supply.

b. Draw a graph of this line.

2. Considering the previous supply line, determine if the following demand function corresponds to the market demand equilibrium stated above. 𝑸𝑫=𝟑𝟎𝟎𝟎−𝟐𝒑.

3. The production function of a firm is described by the following equation 𝑸=𝟏𝟎,𝟎𝟎𝟎𝑳−𝟑𝑳 𝟐 where L stands for the units of labor.

a) Draw a graph for this equation. Use the quantity produced in the y-axis and the units of labor in the x-axis.

b) What is the maximum production level?

c) How many units of labor are needed at that point?

4. Solve the following system of equations.

50𝑥+20𝑦=1800 10𝑥+3𝑦=300

Derive the relationship between marginal cost, wage and marginal product of labour

Suppose a firm employs labor as its only variable input. All workers are paid $200 per day. Output per day and variable cost are shown below.

q 1 2 3 4 5 6 7 8

VC 200 400 600 800 1200 1600 2400 3200

L 1 2 3 4 6 8 12 16

Required:

a)Find each unit of output (Q) calculate the units of labour (L) needed to produce the corresponding output level.

b)If the inverse demand for highlighter is p = 60 - Q. At a price of $20, what is the consumer surplus?

Problem 1:

Figures kept by McClure and Hanover Auctioneers for the past 5 years show that the weight of cattle brought to market has a mean of 950 kg and a standard deviation of 150 kg. What proportion of the cattle have weights of:

1. more than 1,250 kg
   
2. less than 850 kg
   
3. between 1,100 kg and 1,250 kg
   
4. between 800 kg and 1,300 kg?

Problem 2:

A set of observations follow a Normal distribution with a mean of 40 and a standard deviation of 4. What proportions of observations have values of:

1. greater than 46
   
2. less than 34
   
3. between 34 and 46
   
4. between 30 and 44
   
5. between 43 and 47?

MUx = MUy the consumer is not choosing the best affordable (feasible) bundle of goods

Py Py x and y. Explain why?

Martha s preference over two goods x and y is represented by the utility function U = 5xy. Her budget constraint is given by 5x + y = 30

a) Find the MRS

b)Find MRT

c)Given her budget how much of each goods should she consume in order to maximise her utility? show your work.

A vegetable fiber is traded in a competitive world market, and the world price is $9 per pound. Unlimited quantities are available for import into the United States at this price. The U.S. domestic supply and demand for various price levels are shown as follows:

a. What is the equation for demand? What is the equation for supply?

b. At a price of $9, what is the price elasticity of demand? What is it at a    price of $12?

c. What is the price elasticity of supply at $9? At $12?

d. In a free market, what will be the U.S. price and level of fiber imports? 

1.   Assume books and newspapers are substitutes. Paper is used to make books. What will happen in the book market if the price of newspapers increases and at the same time the price of paper goes down?

Graphically and in words show what will happen to the market clearing price (P*), market clearing quantity (Q*). Be sure to label your axes correctly and make it clear which way you are shifting your graphs. Assume ceteris paribus

Alem quits her administrative job, which pays 40,000 ETB a year, to finish her four-year college degree. Her annual college expenses are 8,000 ETB for tuition, 900 ETB for books, and 2,500 ETB for food. What is her opportunity cost of attending college for the year?