Microeconomics Answers

Why do some restaurants charge very high prices for wine, drinks and bottled water and yet

quite reasonable prices for food?

The personnel at Southwest Airline are part of the ___________ resources that make up the 

business.

1 natural

2 physical

3 capital

4 human 

Consider an oligopoly market with two identical firms. Assume each firm produces with 𝐶(𝑞)=10𝑞

C(q)=10q, and market demand curve is 𝑝=50−2𝑄

p=50−2Q.

Solve for the Cournot Nash equilibrium quantities, prices, and profits for the two firms. What is the equilibrium quantity each firm produces?　Round off to two decimal places. 

  From the give table calculate Elasticity of Price, Total Revenue and Marginal Revenue. Also, explain the relationship between AR and MR?

Price Quantity Total Revenue Marginal Revenue

6 0

5 100

4 200

3 300

2 400

1 500

0 600 

An agent has utility u(x1, x2) = (x −1 1 + x −1 2 ) −1 for goods x1 and x2. The prices of the goods are p1 and p2. The agent has income m. a) Show preferences are convex. You can do this graphically or by showing that MRS is decreasing in x1. b) Solve for the agent’s optimal choice of (x1, x2). c) Show the agent’s indirect utility function is given by: V = ( m (p 1/2 1 +p 1/2 2 ) 2 

Derive

the MU function from the following TU function:

𝑇𝑈 = 200𝑄 − 25𝑄2 + 𝑄3

From this MU function, draw up a table up to the level of Q where MU becomes negative. i.e (Q = 1, 2, etc). Graph these figures. (10 marks)

explain why firms will continue hiring workers until the marginal revenue product of labour is ewual to the wage rate

Explain whether there is a shift in the demand curve, the supply curve, or neither, if there is an unexpected shortage of electricity due to low coal supply and or any other source. Use a supply and demand diagram, to illustrate the effect. [15 marks].

John owns a bread bakery. When he increases the price of a loaf of bread from R10 to 

R12, the percentage in the quantity demanded is 5%. Calculate the price elasticity of 

demand for bread.

The price elasticity of demand is inelastic if…