Microeconomics Answers

 The coconut oil demand function is 𝑄 = 1500 − 8.5𝑝 + 14.2𝑝𝑝 + 0.3𝑌. Assume that p is initially 

N$0.55 per kg, 𝑝𝑝 = 𝑁$0.91 per kg and Q=1575 thousand metric tons per year. Calculate income 

elasticity of demand coconut oil.

Explain the difference between macroeconomics and microeconomics.How are these two field related?

A subsidy is the opposite of tax/ With a $0.5 tax on the buyers of ice creams, the government collects $0.5 for each ice-cream purchased; with a $0.5 subsidy for the buyers of ice-cream, the government pays buyer $0.5 for each ice-cream purchases.

Show the effect of a $0.5 subsidy per ice-cream on the demand curve of ice-creams, the effective price paid by consumers, the effective price received by sellers and the quantity of ice-creams sold.

Do consumers gain or lose from this policy? Do producers gain or lose from this policy? Does the government gain or lose?

Given utility maximization problem U= Q1Q2 subject to 10Q1 +2Q2=240 a. Derive the Lagrange function b. Derive the first order conditions c. Use Cramer’s rule to find the critical values of Q1, Q2 and �

. Given the total utility function (T u) = 150x+40x2 = x 3 then Derive marginal utility function and find the value of x at which total utility is maximum 

Two nations can produce computers and software in the amounts given in the table

below. Does either nation have an absolute advantage in producing the products? Which

nation has a comparative advantage in computers? Which nation has a comparative

advantage in software? Explain your answers

(10 marks)

What is the effect of a N$1 specific tax on equilibrium price and quantity if demand is perfectly inelastic?

Consider the situation of a fitness center, which has signed a contract to rent space that costs $10,000 per month. Costs connected for hiring fitness trainers are $15,000 per month. If the center remains open, it will earn revenues of $10,000 per month. Should the center shut down?

If supply of art picture of ancient times decreases due to the shortage of artist 

in a shorter period of time what happened to art market if consumer has 

relatively elastic demand preferences for the art picture of ancient times but 

the supply is relatively inelastic. (support your answer with the help of 

graph).