Microeconomics Answers

Money is regarded as a factor of production. Do you agree with this statement? Support your answer with reasons.

Suppose you are the producer of spinach, carrots and beetroot and you are in a position to decide at which price you will offer these products for sale. What will be your pricing strategy for each of these products in order to increase the total revenue? In your analysis you found that the price elasticity of demand for spinach is 0,4, for carrots is 1,0 and for beetroot is 1,2. Explain your decision in each case.

Suppose you are the producer of spinach, carrots and beetroot and you are in a position to decide at which price you will offer these products for sale. What will be your pricing strategy for each of these products in order to increase the total revenue? In your analysis you found that the price elasticity of demand for spinach is 0,4, for carrots is 1,0 and for beetroot is 1,2. Explain your decision in each case.

QUESTION 5

Perfectly competitive markets will attain long-run equilibrium when:

1. All consumers are happy.
2. All consumers are able to obtain the product.
3. Economic profits have been driven to zero.
4. All of the above.
5. None of the above. 

QUESTION 6

The perfectly competitive firm can sell any number of units:

1. If it drops the price low enough.
2. Only if it charges prices higher than its competitors.
3. At exactly the same price.
4. It chooses at the price it chooses.
5. All of the above.

QUESTION 7At higher levels of output, total cost begins to slope upward more steeply because:

1. Of diminishing marginal returns.
2. Fixed costs are increasing more rapidly.
3. Variable costs are no longer changing.
4. All of the above.
5. None of the above.  

QUESTION 8

The firm doesn’t make a profit:

1. On cloudy days.
2. When it is raining outside.
3. At any level of output.
4. At every level of output.
5. Or a tractor.

QUESTION 17

1. The point of transition between where marginal cost is pulling average total cost down and where it is pulling it up:
2. Occurs at all levels of production.
3. Must occur at the maximum point of the average total cost curve.
4. Must occur at the minimum point of the average total cost curve.
5. Must not occur on the average total cost curve.
6. Needs help paying its bills.

QUESTION 18

1. Fixed costs are often:
2. Simply errors made by accountants.
3. Invented by economists to overemphasize profits.
4. Mistaken for variable costs by seasoned businesspeople.
5. Variable costs.
6. Sunk costs that a firm cannot recoup.

QUESTION 19

1. This tells a firm whether it can earn profits given the current price in the market.
2. Average cost.
3. Variable cost.
4. Fixed cost.
5. Total cost.
6. No cost.

QUESTION 20

1. This helps producers understand how increasing or decreasing production affects profits.
2. Average cost.
3. Variable cost.
4. Fixed cost.
5. Total cost.
6. Marginal cost.

QUESTION 5

When economists use the term capital, they:

1. Are referring only to financial capital.
2. Are referring to financial capital and opportunity cost.
3. Do not mean financial capital.
4. Both answers A and B above.
5. Both answers A and C above. 

QUESTION 6

Different products:

1. Cannot exist.
2. Have different production functions.
3. Have identical production functions.
4. All of the above.
5. None of the above.

QUESTION 7

Eventually, additional workers:

1. Will have decreasing marginal product.
2. Will have increasing marginal product.
3. Will not have a marginal product.
4. Will forget their marginal product.
5. All of the above.

QUESTION 8

Profit is:

1. Always positive.
2. What’s left over from revenues after the firm pays all other costs.
3. The residual.
4. Both answers A and B above.
5. Both answers B and C above.

Suppose you are the producer of spinach carrots and beetroot and you are in a position to decide at which price you will offer these products for sale what will be your pricing strategy for each of these products in order to increase the total revenue? In your analysis you found that the price elasticity of demand for spinach is 0,4 for carrots is 1.0 and for beetroot is 1,2 explain your decision in each case

The impact of COVID‐19 on demand can also be analysed by looking at the problem of utility maximization. Assume that a Dutch tourist derives utility from flying to the US and to Canada

(C). Her utility function equals U (US,C)= 1/2US^2/3*C^1/3 . The prices for flights are P us and P c, respectively, and the tourist’s budget for flights to the American continent is Y.

If the relative price of US and C equals 2, how many flights will the tourist buy of each type (as a function of her budget and prices)? Explain your answer, showing all appropriate derivations.

1. Sketch the total cost function TC=300+40Q-10Q^2+Q^3

1.     Assume a hypothetical consumer consumes good X and good Y. The price of good X is 1 and price of good Y is 3 and the consumer budget is birr 10 for the two goods. Where: QX is quantity of good X, QY is quantity of good Y and TUX and TUY is total utility from consuming good X and good Y respectively.

What are the major properties of indifference curves?

                   Express the budget line of the consumer both algebraically and diagrammatically