Microeconomics Answers

Question 01 04 Marks
Assume a country produces haircuts and shirts with inputs of labour. The country has 1000 hours of labour available. A haircut requires ½ hour of labour, while a shirt requires 5 hours of labour.
a. Construct country’s production- possibility frontier. (2 marks)
b. The country is faced with massive unemployment. How will the PPF be impacted? Explain and indicate on graph. ( 1 mark)
c. The country discovers new technology and moves towards automation. Justify how this will impact the PPF for the economy. Also, indicate the same through the graph. (1mark)

The income elasticities of demand for movies, dental services,
and clothing have been estimated to be +3.4, +1, and +0.5,
respectively. Interpret these coefficients. What does it mean if
an income-elasticity coefficient is negative?

• Question 3: Explore internet and search for the product that is popular in international market but is not available in Pakistan. Assume that you, being a Pakistani national with extensive knowledge of local culture, have been given the responsibility to customize that product according to Pakistani culture and launch it.
Required: Using the Six cultural dimensions of Hofstede, discuss how you can customize the product to make it relevant to the cultural values in Pakistan so that the product gets significant response and acceptability in the Pakistani Market. (5 Marks - Maximum Word Count 250)

Assume that Alexi works 20 hours per week in the business. Assuming Alexi is in business on his own, graph the possible combinations of street tacos and Cuban sandwiches that he could produce in a week. Do the same for Tony.

The lockdown around the world has caused the rapid growth in the electronic market as people have shifted from conventional methods to the new methods for imparting knowledge and staying connected. If demand and supply function are given as:
Qd= 65 – 10P Qs= -35 + 15P
a. Find the equilibrium price and quantity and show it on labeled D/S diagram.
b. How do you interpret market equilibrium: (i) if P= Rs.6? (ii) if P=2?
c. Show on the Demand-Supply diagram in (a), the graphical interpretation of your answer of (b).

What’s another way to calculate marginal cost without total cost

Auctions: A house is up for sale. It will be sold via an auction.
Assume there are four bidders, and that all care only about their own
private value of living in the house, they do not plan to ever sell it in
the future. Their valuations are: 3, 5, 8, 12. If the auctioneer uses
an open ascending bid auction (”English auction”), what will be the
Nash equilibrium price? What will be the payoff to the winner?

Assume a country produces haircuts and shirts with inputs of labour. The country has 1000 hours of labour available. A haircut requires ½ hour of labour, while a shirt requires 5 hours of labour.a. Construct country’sproduction- possibility frontier. (2 marks)

b. The country is faced with massive unemployment. How will the PPF be impacted? Explain and indicate on graph.( 1mark)c. The country discovers new technology and moves towards automation. Justify how this will impact the PPF for the economy. Also, indicate the same through the graph. (1mark)