Microeconomics Answers

Using the demand function, 12-P, and the supply function, 9+0.5P, for coffee, 

Determine the equilibrium price and quantity of coffee if Y=$55, ps=0.20, and pc=$5. 

Draw the demand and supply curves and illustrate this equilibrium in a diagram.

Consider the arguments for restricting trade.

a. Imagine that you are a lobbyist for timber, an

established industry suffering from low-priced foreign competition, and you are trying to get Congress to pass trade restrictions. Which two

or three of the five arguments discussed in the chapter do you think would be most persuasive to the average member of Congress? Explain your reasoning.

Difference between pareto efficiency and pareto Improvement with the help of Edgeworth box diagram

8. A case study in this chapter discusses the fed- eral minimum-wage law.

a. Suppose the minimum wage is above

the equilibrium wage in the market

for unskilled labor. Using a supply- and-demand diagram of the market for unskilled labor, show the market wage, the number of workers who are employed, and the number of workers who are unem- ployed. Also show the total wage pay- ments to unskilled workers.

b. Now suppose the secretary of labor proposes an increase in the minimum wage. What effect would this increase have on employ- ment? Does the change in employment depend on the elasticity of demand, the elas- ticity of supply, both elasticities, or neither?

c. What effect would this increase in the mini- mum wage have on unemployment? Does the change in unemployment depend on the elasticity of demand, the elasticity of supply, both elasticities, or neither?

From the given Demand schedule for air tickets, calculate elasticity of demand

Price of Air Quality Ticket (Per ticket) (Tickets per month)

100000 5000

120000 3500

Elaborate the term elasticity of supply and explain any three factors that determines elasticity of supply

Draw the indifference curve for someone deciding how to allocate time between work and leisure. 

Elaborate the term total revenue and marginal revenue also calculate TR & MR in the given table

Price Output Total Revenue Marginal reve

20 1

18 2

16 3

14 4

12 5

Assume that a consumer consumes two commodities X and Y and makes five combinations for the two commodities

Combinations. X. Y.

A. 25. 3

B. 20. 5

C. 16. 10

D. 13. 18

E. 11. 28

Calculate marginal rate of Substitution and explain the answer.

Consider a profit maximizing firm whose total cost function is given as TC=Q2 +

20Q, consumers of the firm’s products derive benefits from the good according to the

function MB=500 – 12Q. Production of the product has negative effects on the

environment approximated at Ksh. 300 per unit.

(i) Determine the efficient level of output for the firm without government intervention