Microeconomics Answers

some govts require special blends of petrol to reduce emissions,which cost more to produce Occasional disruptions in the supply of petrol from a domestic oil refinery due to for e.g, an industrial disaster will lead to temporary large price increases if imports of more polluting petrol from less environment-friendly refinaries are not allowed perhaps due to opposition from domestic refiness(with large sunk investments)& environmentalists.However, to minimize fluctuations in consumer prices, the domestic govt. might instead impose a tax on imports of standard petrol.The tax could be set at high enough level that in normal economic times standard petrol would not be sold but when disasters trigger a large shift in the supply of domestic petrol,firms could profitably import standard petrol and keep the domestic consumer price from rising more than the amount of the tax Suppose the required tax rate is 15 cents per liter on imports of standard perol.Use a diagram to evaluate the tax alternative.

A large city has nearly 500 restaurants with new ones catering regularly as the population grows. The city decides to limit the number of restaurant licenses to 500. Which characteristics of this market are consistent with perfect competition and which are not Is this restaurant marker likely to be nearly perfectly competitive? Explain your answer

It is argued that monopoly is a bad thing for consumers, but a good thing for producers. Illustrate the argument using diagrams and assuming the industry is faced with constant cost.

The supply curve for butter is QS = 100 + 3P
Where QS is the quantity supplied of butter (in millions of kilos per year) and P is the price of butter ( in Kwacha per Kilo). If the demand curve for butter is a vertical line at QD = 106 millions of kilos per year.
( a ) If the government imposes a price floor of K1 per kilo on butter, will there be an excess supply or excess demand of butter, and how big will it be?
(b ) If the government’s price floor is set at K3 per kilo, will there be an excess supply or excess demand of butter, and how big will it be?
( c) Under the conditions described in part (a) , what is the price elasticity of demand for butter? Do you regard this as a realistic value for this price elasticity? Explain.

There are N players in a perfectly competitive market each with an income of $1000.
There are 5 goods with prices 5, 6, 7, 8 and 9, respectively.
The demand function of every good for each player is given by:

How to graphically show the allocation of output between 2 plants in perfect competition

is a producer of commodity Xwho has experienced an increase in the cost of producing the commodity. As a result, he responds by increasing the price of commodity X from ZMW5 to ZMW10 and continues to produce 250 units of commodity X. Consumers of commodity X respond by reducing the quantity demanded. As such, Alfred's sales reduce from 250 units to 200 units of commodity X. REQUIRED: i. ii. iii. iv. V Define a necessity good in terms of elasticity. Find the price elasticity of supply. Is supply elastic, inelastic or unit elastic? Justify. Find the price elasticity of demand. Is demand elastic, inelastic or unit elastic? Justify. Calculate the loss in consumer surplus to the buyers of commodity X. Calculate the dead-weight loss to the society. Draw a well labelled diagram showing (v) and (vi). State four ways in which you can display the law of demand

is argued that monopoly is a bad thing for consumers, but a good thing for producers. Illustrate the argument using diagrams and assuming the industry is faced with constant cost.