Microeconomics Answers

Problem 1:

Figures kept by McClure and Hanover Auctioneers for the past 5 years show that the weight of cattle brought to market has a mean of 950 kg and a standard deviation of 150 kg. What proportion of the cattle have weights of:

1. more than 1,250 kg
   
2. less than 850 kg
   
3. between 1,100 kg and 1,250 kg
   
4. between 800 kg and 1,300 kg?

Problem 2:

A set of observations follow a Normal distribution with a mean of 40 and a standard deviation of 4. What proportions of observations have values of:

1. greater than 46
   
2. less than 34
   
3. between 34 and 46
   
4. between 30 and 44
   
5. between 43 and 47?

MUx = MUy the consumer is not choosing the best affordable (feasible) bundle of goods

Py Py x and y. Explain why?

Martha s preference over two goods x and y is represented by the utility function U = 5xy. Her budget constraint is given by 5x + y = 30

a) Find the MRS

b)Find MRT

c)Given her budget how much of each goods should she consume in order to maximise her utility? show your work.

A vegetable fiber is traded in a competitive world market, and the world price is $9 per pound. Unlimited quantities are available for import into the United States at this price. The U.S. domestic supply and demand for various price levels are shown as follows:

a. What is the equation for demand? What is the equation for supply?

b. At a price of $9, what is the price elasticity of demand? What is it at a    price of $12?

c. What is the price elasticity of supply at $9? At $12?

d. In a free market, what will be the U.S. price and level of fiber imports? 

1.   Assume books and newspapers are substitutes. Paper is used to make books. What will happen in the book market if the price of newspapers increases and at the same time the price of paper goes down?

Graphically and in words show what will happen to the market clearing price (P*), market clearing quantity (Q*). Be sure to label your axes correctly and make it clear which way you are shifting your graphs. Assume ceteris paribus

Alem quits her administrative job, which pays 40,000 ETB a year, to finish her four-year college degree. Her annual college expenses are 8,000 ETB for tuition, 900 ETB for books, and 2,500 ETB for food. What is her opportunity cost of attending college for the year? 

Assume the following:

• Brad and Jenny both produce food and dishes;

• Constant opportunity costs;

• Brad can produce 100 tonnes of food or 100 tonnes of dishes;

• Jenny can produce 400 tonnes of food or 200 tonnes of dishes;

• In autarky (i.e. self-sufficiency without trade) each person produces both goods and the optimal mix before the trade for Brad is (80) tonnes of food and (20) tonnes of dishes. For Jenny, the optimal mix before the trade is (300) tonnes of food and (50) tonnes of dishes.

a) What is the opportunity cost of 1 tonne of food for Brad? What is the opportunity cost of 1 tonne of dishes for Brad? What is the opportunity cost of 1 tonne of food for Jenny? What is the opportunity cost of 1 tonne of dishes for Jenny?

b) Which person has a comparative advantage in food and which person has a comparative advantage in dishes?

c) What are the minimum terms of trade that each person would be willing to accept in order to trade?

Discuss the need for and problem associated with the administration of subsidies?

The cost of sunflower seeds has increased. Sunflower seeds are an input when sunflowers are produced. How this change will affect the market for sunflowers

discuss how businesses might attempt to change the price elasticity of demand for their products and consider which approach is most likely to be successful