Microeconomics Answers

A firm is faced with undertaking one of these four projects in 2022 – open new branch, introduce another product, purchase a brand new vehicle, or increase workers’ salary. The costs and expected benefits of the projects are presented in the table below.

  Activity

Branch Product Vehicle Salary

Direct cost Benefit (GH¢) (GH¢) 380 390 400 400 350 392 422 425

        Use the information provided in the table to answer the following questions.

a) Compute the net benefit of each project using the direct cost.

b) Find the opportunity cost of each project.

c) Compute the net benefit of the projects using the opportunity cost.

Assume that a consumer consumes two commodities x and y and makes give combination for the two commodities? Explain its In your own words

Given the Demand function Q1 = 100-P1+0.75P2-0.25P3+0.005Y Calculate the price, income and

cross-price elasticity of demand and interpret the result respectively at P1=8, P2=15, P3=30 and

also Y=8,000 �

The Inquiry Club at Jefferson University has compiled a book that exposes the private lives of many of the professors on campus. Economics majors in the club estimate that total revenue from sales of the book is given by the equation:

TR =120Q - 0.1Q³

a. Over what output range is demand elastic?

b. Initially, the price is set at $71.60. To maximize total revenue, should the price be increased or decreased? Explain.

The arc advertising elasticity is 1.5 as advertising expenditure increase from $10 to $12 million. If demand is 50 at an advertising expenditure of $12 million, what will demand be at an advertising expenditure of $10 million?

The price of oil is $30 per barrel and the price elasticity is constant and equal to -0.5. An oil embargo reduces the quantity available by 20 percent. Use the arc elasticity formula to calculate the percentage increase in the price of oil.

Sailright Inc. manufactures and sells sailboards. Management believes that the price elasticity of demand is -3.0. Currently, boards are priced at $500 and the quantity demanded is 10,000 per year,

a. If the price is increased to $600, how many sailboards will the company be able to sell each year?

b. How much will total revenue change as a result of the price increase?

A furniture manufacturer can sell dining-room tables for $70 apiece. The manufacture‘s total cost consists of a fixed overhead of $8,000 plus production costs of $30 per table.

a. How many tables must be the manufacturer sell to break even?

b. How many tables must the manufacturer sell to make a profit of $6,000?

c. What will the manufacturer’s profit or loss if 150 tables are sold?

Acme Tobacco is currently selling 5,000 pounds of pipe tobacco per year. Due to competitive pressures, the average price of a pipe declines from $15 to $12. As a result, the demand for Acme pipe tobacco increase to 6,000 pounds per year.

a. What is the cross elasticity of demand for pipes and pipe tobacco?

b. Assuming that the cross elasticity does not change, at what price of pipes would the demand for pipe tobacco be 3,000 pounds per year? Use $15 as the initial price of a pipe.

Acme Tobacco is currently selling 5,000 pounds of pipe tobacco per year. Due to competitive pressures, the average price of a pipe declines from $15 to $12. As a result, the demand for Acme pipe tobacco increase to 6,000 pounds per year.

a. What is the cross elasticity of demand for pipes and pipe tobacco?

b. Assuming that the cross elasticity does not change, at what price of pipes would the demand for pipe tobacco be 3,000 pounds per year? Use $15 as the initial price of a pipe.