Microeconomics Answers

define monopoly

A business firms sells a good at the price of Rs 450.The firm has decided to reduce the
price of good to Rs 350.Consequently, the quantity demanded for the good rose from
25,000 units to 35,000 units. Calculate the price elasticity of demand.

Goods x and y are perfect substitutes. The price of x decreases and you observe that consumption of x increases. Which of the following is TRUE?

Question 9 options:

MRS<pxpy
at both sets of prices, and there is no substitution effect, only an income effect


MRS>pxpy
at both sets of prices, and there is no income effect, only a substitution effect


MRS<pxpy
at both sets of prices, and there is no income effect, only a substitution effect


MRS>pxpy
at both sets of prices, and there is no substitution effect, only an income effect

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

A business firms sells a good at the price of Rs 450.The firm has decided to reduce the
price of good to Rs 350.Consequently, the quantity demanded for the good rose from
25,000 units to 35,000 units. Calculate the price elasticity of demand.

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 the Marginal Rate of substitution and explain your answer

Characteristics of oligopoly market ?

You are an analyst employed by an airplane manufacturer that last year sold 50,000 ATR-72
aircrafts at $500,000 each. Your market research indicates that:
i) the price elasticity of demand for your aircrafts in −0.3. (or +0.3 in absolute value);
ii) the income elasticity of demand for your aircrafts is +2.7; and
iii) the cross price elasticity for your aircrafts with respect to the price of a comparable jet
manufactured by a competitor is +2.2.

a) Suppose that you expect a ceteris paribus decrease in average incomes of 7% this year
compared to last year. How many aircrafts do you estimate that your company will sell this
year? How will it impact total revenues?

A firm faces the demand schedule q = 400 − 2p − p2. What price does it need
to charge to sell 100 units?

A firm has a production function given as Q(K,L) = K½, L½. Given that labour cost (L) = Ksh.4 and capital (K) costs Ksh. 12 and the firm has a budget of Ksh. 30000. Determine; the objective and the constraint functions, formulate the optimisation problem of the firm , find the amounts of K and L that a firm should employ to optimize output.