Microeconomics Answers

The average revenue function for a commodity is p = 50 – 4q. Find edp when:

demand = 5 units ; price = Rs. 6. Find consumer’s surplus at price = Rs. 6

The average revenue function for a commodity is p = 50 – 4q. Find edp when:

demand = 5 units ; price = Rs. 6. Find consumer’s surplus at price = Rs. 6

Consider the supply function: Qs = 60 + 5P – 12 PI + 10F , Where Qs = quantity supplied, P = price of the commodity, PI = price of a key input in the production process, and F = number of firms producing the commodity.

Interpret the slope parameters on P, PI, and F. 3 marks 

Derive the equation for the supply function when PI =$90 and F = 20. 1 mark

Sketch a graph of the supply function in part b. At what price does the supply curve intersect the price axis? Give an interpretation of the price intercept of this supply curve. 6 marks            

Using the supply function from part b, calculate the quantity supplied when the price of the commodity is $300 and $500. 2 marks 

Derive the inverse of the supply function in part b. using the inverse supply function; calculate the supply price for 680 units of the commodity. Give an interpretation of the supply price.

Which one of the following government policies is most likely to reduce market failure and to improve the allocation of resources?

A a higher rate of tax on all firms earning profit

B a min price for demerit foods above their free market price

C free market pricing for the provision of public goods

D subsidies paid to all loss making firms to maintain full employment

Solve five games (either Nash equilibrium or dominant strategy) as an example of oligopoly firm behaviour. 

Terry’s utility function over leisure (L) and other goods (Y ) is U(L, Y ) = Y + LY. The associated marginal utilities are MU_Y = 1 + L and MU_L = Y. He purchases other goods at a price of $1, out of the income he earns from working. Show that, no matter what Terry’s wage rate, the optimal number of hours of leisure that he consumes is always the same.

(a)   What is the number of hours he would like to have for leisure? (1 marks)

(b)  Determine the MRS of leisure for labour (2 marks)

Draw a leisure-influenced labor curve 

Assess the likely impact of these drop-out rates on the allocation of resources within an economy.

The demand curve for Blivets (shown below) has the formula

 P =h(q) = 12-4

Where q is measured in thousand of Blivets and p is measured in dollars. We

Get Total revenue(measured in thousands of dollars) from this curve by the recipe

TR(q)=q*h(q). The total cost (measured in thousands of dollars ) of manufacturing Blivets

Is given by the formula TC(q)= q+1. Due to the limited supply of raw material, we

Cannot manufacture more than 3500 Blivets ( q=3.5)

A) write the formula for TR(q) and TR'(q) ( simplify your answer as much as possible)

b) find the value of q in the interval between q=0 and q=3.5 thousand blivets at which profit is greatest

c) find the formula for Total profit p(q) of selling q thousand blivets

d) b) find the value of q in the interval between q=0 and q=3.5 thousand blivets at which TR(q) reaches its largest value

Suppose that you are the owner of an icethat the price elasticity of the demand for ice Would you sell icecream shop and that you have established cream in your particular market is 1,8. cream at R10 per litre or R9 per litre? (2 marks) Explain (3 marks

Explain what will happen to the total revenue of the suppliers of food if the price of food: increases and decrease