Microeconomics Answers

A)  In 2004, US Congress allocated over USD20 billion to fight illegal drugs. About 60 percent of the funds was directed at reducing supply of drugs through domestic law enforcement and interdiction. Some critics of this approach argue that supply-side approaches to reduce drug actually help drug producers.

a.     Demonstrate graphically the effect of supply-side measures on the market for illegal drugs.

Demonstrate the effect of both supply-side (law enforcement and interdiction) and demand-side measures (treatment and prevention on the market for illegal drugs). How do they affect the profitability of producers? 

Five final year science students from UNAM started from scratch to mix and filling of sanitisers in batches of 50 containers of 500ml in order to meet the unexpected spike in demand. Each intern is remunerated a rate of N$7.50 per hour of production. It takes 12 hours to manufacture the first batch and a total cumulative time of 27 hours to manufacture the 4th batch.

Required:

4.1Using the learning curve techniques, determine the rate of learning for the given scenario.

4.2Determine the time it take the team to complete the 8th batch.

4.3 The Ministry of Health and Social Services has placed a special order of 150 containers. What would be the incremental direct labor cost for the special order assuming normal production are 8 batches

F. Frans is the workshop supervisor of NBW. She is paid a fixed salary monthly of N$10000. To keep her motivated she is entitled to an annual bonus of N$9000 to her pension fund annually. She works 9 hours per day from Monday to Friday every week. She is also entitled to 28 days paid vacation leave. There are 12 public holidays in the year for which 9 fall on weekends. Assume a 365 days year.

Required:

Using information relating to F. Frans compute Frans s hourly recovery tariff per hour.

TRUE/FALSE

1. Suppose that aggregate demand increases starting from an equilibrium income level. this implies up upwards pressure on the average consumption levels and output that increases. Since the standard of living of employees decreases owing to the higher prices, that employees will start to negotiate higher nominal wages. this is it called a short-run demand adjustment process
2. The interaction between AS and AD over the long run is more complex.It entails that over a period of time the adjustments (shifts) that are set in motion tend to lead the country and more specifically production and employment, to a cyclically stable or cyclically neutral level of “full” or saturated employment.
3. The value of the multiplier(K) depends on factors such as marginal propensity to save (MPS) the marginal propensity to import (MPX) and the marginal tax rate (MTR). The value of the multiplier is therefore in practice between the values of a 1 and 2

There are various main objectives in the macroeconomics policy, each of which contributes to an explanation and understanding of macroeconomics. Briefly define the following macroeconomic objectives and explain in your own words how each can be applied to improve the economy:

1. Economic growth and increasing employment (5)
2. Stability of output and employment levels (5)
3. Stable and low inflation (5)
4. Distributional and equity objectives and the reduction of inequality (5)
5. Economic development and poverty reduction (5)

Out of 25

The price elasticity of demand for urban transitfares has been estimated to lie between

-0.1 and -0.6. Based on these results, what isthe economic argument forraising transit

fares? What political arguments might local governments and transit authorities

encounterin opposition to these economic arguments?

The price elasticity for rice is estimated to be -0.4 and the income elasticity is 0.8. At a price of $0.40 per pound and a per capita income of $20,000, the demand for rice is 50 milllion tons per year

a) is rice an inferior good, a necessity or a luxury? explain.

b) if per capita income increases to $20,500, what will be the quantity demanded of rice?

•Given the following set of simultaneous equations for two related goods,xandy, find the equilibrium conditions for each market if the consumers’ income isi=600. What types of goods arexandy?

•Q_dx= 22-3P_x+P_y+ 0.1i

• Q_sx=-5+15P_x

•

•Q_dy=32+2P_x-4P_y+0.1i

•Q_sy=-6+32P_y

A. Given the demand function 𝑄𝑑 = 15 − 0.2𝑃, find quantity demanded when price is GH¢ 2.00, GH¢ 5.00, GH¢ 7.00, and GH¢ 10.00. Present your results in a table.

B. Demand function for good X is given as Qdx = 6 – 0.2Px + 0.28Pz – 0.45Py

where Qdx is quantity demanded for good X, Px is price of good X, Py and Pz are

prices of related goods. Y is good Y and Z is good Z.

i. What type of good is Y? Explain your answer. ii. What type of good is Z? Explain your answer.

QUESTION THREE

With the aid of diagrams, explain the difference between increase in demand and increase in quantity demanded.