Microeconomics Answers

If the required reserve ratio is 10%, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, calculate the money supply?

Given utility maximization problem U=Q1Q2 subject to 1OQ1 +2Q2=240

a. Derive the lagrange function

Suppose you have a firm that produces a product that is indivisible at a constant

marginal cost of £42. Currently, you have 12 customers. Each of them buys at most

one unit of the product. Below are the valuations that these customers have;

£30, £36, £45, £48, £51, £57, £66, £75, £78, £81, £90, £93

a) If you charge a single price, what price should you charge? What is your total

profit? (5 MARKS)

b) Do you think there are customers who are currently not buying the product?

Do you think there are customers you could sell the good at a price that would

make both of you (seller and customer) better off? Explain you answer clearly.

(10 MARKS)

c) Suppose you want to charge your customers using perfect price

discrimination. Which customers do you sell to, how much do you charge?

What is the profit (if any)? (15 MARKS)

A monopoly firm has demand function, q=50-2p and cost function, c=q2 .

a) Compute the equilibrium quantity and price for this firm. (5 MARKS)

b) Calculate the consumer surplus and producer surplus when this firm is at

the equilibrium position. (5 MARKS)

c) Let t is the government tax levied on/subsidy given to this monopoly firm.

i) What is the price paid by the consumer?

ii) Calculate the equilibrium quantity and price after the tax is introduced

iii) Compute the after-tax/subsidy consumer surplus and producer

surplus for this firm.

(15 MARKS)

d) If t in question (c) can give the same welfare as under perfect competition,

what is the price paid by the consumer? What is the value of t ? Is t a tax or

subsidy? What is the price received by the monopoly firm? (5 MARKS)

Give examples if economic problems that are solved with the help of first and second order difference equation.

commodity, answer the questions that follow ( The price of the good is Br.10)

Income

Quantity Demanded

(Br. / month)

units/ month)

10,000

50

20,000

60

30,000

70

40,000

80

50,000

90

A) Calculate income elasticity of demand, if income increases from Br.10, 000 to Br.

20,000 and if income increases from Br.40, 000 to Br. 50,000.

B) Is this a normal or an inferior or a luxury good? Justify.

C) Does the proportion of household income spent on this good increase or decrease as

income increases? .Why?​

1. Assume that a certain simplified economy produces only two goods, X and Y, with given resources and technology. The following table gives the various possible combinations of the production of the two goods (all units are measured in millions of tons).Opportunity Cost ofProduction Possibility Good X Good Y Good X
A 0 100
B 2 90
C 4 60
D 6 20
a) Calculate the opportunity cost of the production of good X at each point. What law does the trend in those values exhibit?
b) What changes are required for this economy to shift the PPF outward?

Explaine wirh the aid of a figure circular flow of income and spending

Suppose that the Market for Cigarette is facing the Demand function Q = 20 – 2P and Supply function Q = 

10.5 + 0.5P:

a) What is the effect on the Equilibrium Price and Quantity when Government imposes a 7% of tax as 

percent of equilibrium price on each unit of Cigarette produced? [5 marks]

b) What is the price elasticity of demand at equilibrium after tax and comment on the answer? 

 [5 marks]

Diogo has a utility function𝑈[𝐵, 𝑍] = 𝐴𝐵∝𝑍

𝛽, where A, α and β are constants, B is burritos, and Z is pizzas. If 

the price of burritos, Pb, is N$2 and the price of pizzas, Pz is N$1, and Y is N$100, what is Diogo’s optimal 

bundle?