Microeconomics Answers

Explain the changing balance and tax sharing on the graph when a $ 5 tax is applied to a low product with a market balance price of $ 10?

If the equation for a market demand curve is Qd=15-0.2P and the equation for a market supply curve is Qs=1+ 0.6P, what is the consumer surplus

Imagine that tuition for your education has increased by 20%. How do you think it will affect consumer demand and behavior? Why?

Problem #1

1. Complete the following table and identify the quantity that maximizes profit.

Quantity TR MR TC MC

0 0 5

1 10 2

2 20 15

3 30 10

4 10 37

Problem #2

1. Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q – 5Q2 + 0.5Q3, where MC = 500 – 10Q + 1.5Q2.

1. Calculate the output that minimizes the firm’s AVC.
2. What is the firm’s shutdown price?

The demand function equation faced by PTCL for its computers is given by: P = 50,000 – 4Q i. Write the marginal revenue equation ii. At what price and quantity marginal revenue will be zero? iii. At what price and quantity will total revenue be maximized?

(6 marks)

Following are the transactions in Paris city last year:                                   

Item                                                                 AED

Taxes                                                              200,000

Investments                                                     300,000

Government Expenditure                                150,000

Exports                                                           250,000

Savings                                                            500,000

1.     Calculate government balance and explain the result.   (2 marks)

1.  Calculate private sector balance.       (2 marks)                                                                                     

Calculate net exports and explain the result.   

An exclusive pen manufacturer sells 4,000 pens per month at a price of £40 each. When the price is reduced to £30 sales increase to 6,000 pens per month. (a) Calculate the price elasticity of demand for the pens over this price range. (b) Is demand elastic, unit elastic or inelastic? (c) Calculate the change in revenue due to the change in price

An analyst remarked that economic booms are always accompanied by fraud, which is revealed

when the boom is over and the share values are falling.

- Why are frauds easier to carry out during a share market boom and more likely to be

exposed during a share market downturn?

Briefly explain whether you agree with the following statement: ‘The reluctance of healthy young

adults to buy private health insurance creates a moral hazard for insurance companies’.

-Which ‘types’ of young people are more likely to buy health insurance?

-Is this a problem of moral hazard per se? How does ‘moral hazard’ fit in?

Identify each of the following externalities and explain why they are an

externality.

a.after eating a burger you vomit on your best friend

b.a cyclone causes the price of bananas to increase

c.your mobile phone goes off during the lecture

d.a firm pours chemical wastes into the river killing the fish

e.you visit the doctor and get a flu vaccination

f.tension in the Middle East increases the price of petro