Microeconomics Answers

Which one of the following is not a characteristic of monopolistic competition

A. There is easy entry and exit into the market

B. Firms may earn an economic profit in the short run

C. There is product differentiation.

D. Firms set the price of their product equal to their marginal cost

A monopoly publishing house publishes a magazine, earning revenue from selling the

magazine, as well as by publishing advertisements. Thus R = q.p(q) + A(q), where R is

total revenue, q denotes quantity, p(q) is the inverse demand function, and A(q) is the

advertising revenue. Assume that p(q) is decreasing and A(q) is increasing in q. The cost

of production c(q) is also increasing in the quantity sold. Assume all functions are twice

differentiable in q.

(i) Derive the profit-maximising outcome.

(ii) Is the marginal revenue curve necessarily negatively sloped?

(iii) Can the monopolist fix the price of the magazine below the marginal cost of production?

farmers are deciding what crop to plant and learn that the price of garlic has risen dramatically relative to the price onion. suppose that garlic and onion can be produce by using almost the same resources. predict the effect on the onion market

Explain the following statement using supply and demand curves

a.when fall army worms invade a country,the price of maize rises in the market.

b.when there is a coup in a country rich in iron ore, the price of building material rises.

c.when an economy is in recession,peoples income fall and hence the price price of restaurant meals falls

d.when a war breaks out in the middle east, the price of gasoline rises and the price of a used cadillac falls.

Please explain why the law of diminishing returns applies only in the short-term period.

Suppose a firm finds that the marginal product of capital is 60 and the marginal product of labor is 20. If the price of capital is $6 and the price of labor is $2.50, describe how the firm should adjust its mix of capital and labor? What will be the result?

monopoly features

Assume that a certain simplified economy produces only two goods, X and Y, with given resources and technology. The following table gives the various possible combinations of the production of the two goods (all units are measured in millions of tons).

Production Possibility

Good X

Good Y

Opportunity Cost of 

Good X

A

100

B

2

90

C

4

60

D

6

20

Calculate the opportunity cost of the production of good X at

   each point. (2 points)

Discuss why analysis of agricultural economics should place a lot of emphasis on the farm level of production

A consumer's utility function is given by the

expression: U = (0.6X" + 0.4Y^°'1².

·    Determine the marginal utility functions for each commodity. Does marginal utility decrease when consumption increases?

·    Assuming that the price of good X is Rs 15 and the price of Y is Rs 6, write the equation of the budget line and plot it when income is Rs 450. What is its slope? What does it indicate?

·    Calculate the marginal rate of substitution of Y for X and interpret its economic meaning. Write the equation showing the consumer's equilibrium condition.

·    Obtain the equilibrium values of X and Y.

·    Find the expressions for change in MU₎, due to increase in Y and change in MU, due to increase in X.