Microeconomics Answers

Consider a market with two firms. Each firm is located at one end of a line with lenght one. There is a mass one of consumers. The location of each consumer is given by 0 < x < 1 which is uniformly distributed (with density 1). Firms have no cost of production and set price simultaneously.

1. Derive the demand for each firm by identifying the location of the indifferent con- sumer for each price pair. Assume that all consumers know about both products.
2. Consider again that consumers can only buy after receiving an ad. Suppose there is an avdertising company that offers the firms to coordinate the targeting of their ads. The company suggests to inform all consumers with a location between 0 and 0.4 the product of the firm at location 0 and to all consumers between 0.6 and 1 the product of the firm at location 1. Determine the optimal prices for both firms if they accept this offer. What are the resulting profits?

Carefully discuss how an increase in the budget deficit may impact the private savings, private investment, and trade deficit. Carefully explain the process through which a larger budget will affect these macroeconomic variables.

The productive capability of an economy is such that to produce 5 units of military 

good it takes 2 workers to be employed while 10 units of consumer goods require 3 

workers. Resources are limited in such a way that only 75 units of military good can 

be produced when all resources are employed.

a) How much workers are in the economy?

b) What is the maximum amount of consumer goods that can be produced?

c) Construct the production possibility schedule and curve for this economy.

d) Graphically represent what would happen if 12 additional workers were added 

to the economy.

e) Graphically represent what would happen if the productivity of the workers 

were reduced to 2 units of military good and 5 units of consumer goods.

f) Graphically represent what would happen if productivity for military goods 

remained the same but it now required 2 workers to produce 10 units of 

consumer goods?

Economic is ?

Use the diagram above to explain what is meant by the term ‘external costs of production’, and use a suitable example to explain why these external costs will result in inefficient output being produced.

QUESTION 1

A firm uses a single input labour to produce output q according to the production

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The commodity sells for R150 per unit and the wage rtae is R75 per hour.

a) Find the profit maximizing quantity of L (3)

b) Find the profit maximizing quantity of q and the level of maximum profit. (5)

c) Suppose now the firm is taxed at R30 per unit of output and that the wage rate is subsidized

at a rate of R15 per hour. Assume that the firm is a price taker, so the price of the producer

remains at R150. Find the new profit maximizing levels of L, q and profit. (6)

d) Nowsupposethefirmisrequiredtopaya20percenttaxonitsprofits,Findthenewprofit maximizing levels of L, q and profit.

on # 3. Ceja has utility function U=A2*B2 , where A equals the number of apples she eats each week, while B is the number of bananas she eats each week. Ceja has $20 to spend on fruit each week. The price of an apple is $1, while the price of a banana is $0.25. 

Find out the combination of Apples and Bananas that maximize Ceja’ satisfaction

Suppose a producer faces the following production function: K^0,5.K^0,5 given that L is the unit of labour and K is the unit of capital. Suppose K is 16, labour wage rate is R10 and rental rate of capital is R50, derive the TC and MC functions

Given a firms demand function Q-90+2P=0 and it's average cost function AC=Q²-8Q+57+2/Q. Find the level of output which maximises marginal cost.

How would I write a thesis and intriduction statement for this essay. 'Discuss South Africas focus on public sector wage bill as an expenditure control measure '