Microeconomics Answers

Tim and Drea can both make eggs and toast. If Drea's opportunity cost of making one egg is 2 pieces of toast and Tim's opportunity cost of making one egg is 4 pieces of toast, a mutually advantageous trade can be struck at a price of one egg for 3 pieces of toast.

Is this true or false?

1. You have been asked to analyze the market for steel. From public sources, you are able to find that last year’s price for steel was $20 per ton. At this price, 100 million tons were sold on the world market. From trade association data you are able to obtain estimates for the own price elasticities of demand and supply on the world markets as −0.25 for demand and 0.5 for supply. Assume that steel has linear demand and supply curves throughout.
2. (a) (10 points) Solve for the equations of demand and supply in this market and sketch the demand and supply curves.

The demand curve for good X passes through the point P = $2 and Qd = 35. Give two interpretations

derive the conditions for steady state growth in the solow model?

1.     A risk-averse person has wealth y0 and faces a risk of loss L < y0 with probability. An insurance company offers cover of the loss at a premium L. It is possible to take out partial cover on a pro-rata basis, so that an amount  of the loss can be covered at cost  where.

a)      Explain why the person will not choose full insurance

b)      Find the conditions that will determine t*, the optimal value of.

c)      Show how will change as increases if all other parameters remain unchanged.

Suppose that the firm has two possible activities to produce output. Activity a uses a1 units of good 1 and a₂ units of good 2 to produce 1 unit of output. Activity b uses b_l units of good 1 and b2 units of good2 to produce 1 unit of output. Factors can only be used in these fixed proportions. If the factor prices are (w_l, w₂), what are the demands for the two factors? What is the cost function for this technology? For what factor prices is the cost function not differentiable?

Write down the basic functions of the household and firm with respect to circular flow diagram

Analyze the effect of new hybrid seed is used for producing rice.show the change in PPF curve

Draw the circular flow diagram by showing two sector and two market.show the flow of goods and services, factors of production and financial services in it.

Draw a separate circular flow diagram and show the following transaction in it .(1)mother dairy produces 31000 litres milk per annum and sold it at a price of rs 30 per litre