Microeconomics Answers

Suppose that Omar’s marginal utility for cups of coffee is constant at 5.5 utils per cup no matter how many cups he drinks. In contrast, his marginal utility per doughnut is 11 for the first doughnut he eats, 10 for the second, 9 for the third, and so on (that is, declining by 1 util per additional doughnut). In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on doughnuts, coffee, or both.



How big would that budget have to be before he will spend a dollar buying a first cup of coffee?

A perfectly price discriminating monopoly has 2 consumers: consumer 1 with demand curve q1=10-p and consumer 2 with demand curve q2=8-p. The monopoly's cost function is c(Q)=Q2. The quantity consumer 2 will consume is:

Assuming a simple linear market demand curves of goods x, explain the relationship between price, total and marginal revenue and elasticity of demand using your answer, explain why might a revenue maximizing from selling a luxury good reduce jts product price.

1) Based on your learning in Microeconomics, explain how COVID-19 has a favourable and an adverse impact in today’s situation, with aids of diagram “Market Forces of Supply and Demand” and “Elasticity”. (25 marks)
2) Illustrate with TWO real examples (one favourable and one adverse impact) in the retail industry in Hong Kong or Mainland China or your country to show your understanding and application of supply and demand as well as elasticity. (50 marks)
3) Principle 6 of Economics states, “Markets are usually a good way to organize economic activity”. Hopefully COVID-19 will end some time in the near future. Predict how the retail industry would become in the economy with the aftermath of the pandemic. (25 marks)

In what ways is your standard of living different from that of your parents or
grandparents when they were your age

Giving the diversity of developing countries, do you think that there could ever be a single unified theory of development?

A firm operates in a perfectly competitive market. The market price of its product is 4 birr and the total cost function is given by TC= 1/3Q3 -5Q2+20Q+50, where TC is the total cost and Q is the level of output.

The utility function of the consumer is 5x
0.5y
0.5

The income of the consumer is 5000
The price of good x is 1,000 and the price of good y is 500.
Determine the optimal consumption bundle.

A local council raises the price of car parking from E3 per day to {5 per day and finds that usage of car parks contracts from 1,200 cars a day to 900 cars per day.
Calculate the price elasticity of demand for this price change and calculate whether total revenue from the car park rises or falls

Ernie owns a water pump. Because pumping
large amounts of water is harder than pumping
small amounts, the cost of producing a bottle of
water rises as he pumps more. Here is the cost
he incurs to produce each bottle of water:
Cost of first bottle $1
Cost of second bottle $3
Cost of third bottle $5
Cost of fourth bottle $7
a. From this information, derive Ernie’s supply
schedule. Graph his supply curve for bottled