Microeconomics Answers

In at least three well-composed paragraphs, please describe the effect that changes in business taxes, personal income, and transfer payments have on a country’s gross domestic product (GDP).

A federal regulator is asked to determine the minimum cost reduction required to support the merger of two duopolistic firms. It is important to note that the two firms have similar cost structure with a constant per unit cost and no fixed costs. As of now, each of the two firms produces an output 𝑞 = 20 at a price 𝑃= 50. 

Note that the socially efficient quantity estimated to be equal to 40. 

You need to find: 

1.     The slope and the vertical intercept of the demand curve

2. The pre-merger average cost. 

3.     The size of the social loss resulting from the merger

What would be the effective rate of protection on bicycles in China if China places a 50 percent tariff on bicycles, which have a world price of Php200,and no tariff on bike components, which together have a world price of Php100?

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Question One.

A monopolistic firm has the following demand functions for each of its products 𝑥 and 𝑦.

𝑥 = 72 − 0.5𝑃x

𝑦 = 120 − 𝑃𝑦

The combined cost function is

𝑐 = 𝑥² + 𝑥𝑦 + 𝑦² + 35

and the maximum joint production is 40. Thus, the constraint is 𝑥 + 𝑦 = 40. Find the profit 

maximizing level of

i. Output

ii. Price

iii. Profit

Question Two.

A farmer uses three inputs namely capital (K), Labour (L) and land (R) to produce output (Q). Assume 

the production function is given by

𝑄 = 24𝐾^0.3𝐿^0.2𝑅^0.3

The firm buys capital at K40 per unit, labour at K10 per unit and land at K60 per unit and has a total 

of K3000 to spend on inputs for the season.

a. Does the production function exhibit increasing, constant or decreasing returns to scale? 

Explain

b. What is the optimal combination of the three inputs?

Q5. Katherine advertise to sell cookies for $4 a dozen. She sells 50 dozens and decided that she can charge more. She raise the price to $6 a dozen and sell 40 dozen. What is elasticity of demand? Assuming that the elasticity of demand is constant. How many would she sell if the price were $10 a box?

 Use the tools we’ve discussed so far in Module 3 to explain these trends in US manufacturing. Specifically, you need to address how it’s possible to produce the same output with fewer workers – what’s making US manufacturing workers more productive? A big hint: the rental price of capital follows long-term interest rates in the US pretty closely. If you argue that something causes firms to change their behavior, use a specific argument like “buck for the bang” to explain why.

  If we assume that firms were minimizing their costs before, the lower rent

true or false?

 A Suppose the consolidated balance sheet of an economy where the public holds all its money in the form of bank deposits is shown in the following table. If the banking system is originally in equilibrium and then the economy’s central bank sells 50 worth of government bonds to the banking system, immediately after the transaction there is no change in the money supply, but after the banking system has returned to equilibrium, the money supply is reduced by 1000. [Hint: Use two additional balance sheets in your answer.] Assets: 

Liabilities: 

Reserves 

100 

Deposits 

2000 

Government Bonds 

300 

Loans Outstanding 

1800 

Capital 

200 

Total 

2200 

Total 

2200 

Whenever a nation is producing on its PPF, that nation will be using all of its available resources.

 a. True b. False

Using a properly laballed production possibility frontier, distinguish between maximum attainable combinations, attainable but inefficient combinations of the production of rice and maize