Microeconomics Answers

1.5 In the labour market for carpenters, the current market clearing wage rate is R800 per day. With the
aid of a diagram, discuss the welfare effects of government intervention in the form of legislation that
sets the minimum wage rate for a carpenter at R1000 per day. (20 marks)

(A) the determinants of the price of a product in a perfectly competitive market is where the

(1) supply and demand curves intersect
(2) quantity supplied and quantity demanded intersect
(3) marginal cost equals the price of the product
(4) marginal revenue equals the marginal cost

(B) A minimum wage in a perfectly competitive labour market

(1) will normally be imposed below the equilibrium wage
(2) which is imposed above the equilibrium wage,will lead to an excess demand of labour
(3) which is set above the equilibrium wage, will lead to unemployment
(4) can be instituted in an attempt to exploit low-wage workers and to depress their living standard even further

(C) A utility maximising consumer will choose to purchase another unit of a good if

(1) the opportunity cost of consuming the good is constant
(2) the marginal utility of the good is falling
(3) the good has the lowest weighted marginal utility
(4) the good has the highest weighted marginal utility

assume at the price of 5 naira per unit 50 oranges and 35 pineapple are bought as a result of prices of oranges to 15 naira per unit. the quantity of price of pineapple purchase increase to 70 unit while oranges decreased to 15 unit. what is the cross elasticity for demand of pineapple.
find:
cross elasticity for pineapple

Tom is a full-time lecturer at a private higher education institution and is considering a career in carpentry. He wishes to pursue a career in carpentry (a childhood dream) which he has studied part-time and is now equipped to take on clients. In his current position he earns a rate of R1000 per day and if he were to pursue a career in carpentry he would earn R800 per day. Due to the flexibility of the employment conditions at the higher education institution he works for, Tom can negotiate the number of days he works at and will receive a rate of remuneration based on the number of days worked. Question: Construct a production possibility frontier to illustrate Tom’s earnings potential between the two careers if initially he was not working as a carpenter, then he worked one week per month, then two, then three and finally four weeks per month (assuming only four weeks in a month).

3. Suppose that you are the manager of a soccer stadium where all the tickets always have to be sold at the same price. Two matches are scheduled to be played during the next fortnight, the first between Sundowns and Pirates and the second between two First Division sides. (USE ARC PRICE ELASTICITY).
(a) Market research indicates that you can sell 40 000 tickets for the Sundowns-Pirates clash at R10 each, or 30 000 tickets at R20 each. Which option would you choose? What is the price elasticity of the demand for tickets for this particular game? (5 marks)

Tom is a full time lecturer and is considering a career in carpentry. In his current position he earns R 1000 per day and if he pursues a career in carpentry he would earn R 800 per day. due to flexibility of the employment conditions at the institution he works for, Tom can negotiate the number of days he worked at and will receive a rate of remuneration based on the days works. Construct a production possibility frontier to illustrate Tom's potential between the two careers if initially he was not working as a carpenter, then he worked one week per month, then two weeks, then three weeks and then four weeks per month, assuming only four weeks in the month.

1. The demand for ice cream cones is P=1600 and Qd is 2
The supply of ice cream cones is P =400 and Qs is 1. The price of a cone is expressed in cents, and the quantities are expressed in cones per day. To find the equilibrium price (P*) and the equilibrium quantity (Q*), substitute Q* for QD and QS and P* for P. (8 marks). (FOR QD, P=a-bQd and for QS, P=c+dQS).

1. The demand for ice cream cones is P=1600 and Qd is 2
The supply of ice cream cones is P =400 and Qs is 1. The price of a cone is expressed in cents, and the quantities are expressed in cones per day. To find the equilibrium price (P*) and the equilibrium quantity (Q*), substitute Q* for QD and QS and P* for P.

2. The demand and Supply Schedules for potato chips are:
Price(rand per bag)
Quantity demanded(millions of bags a week)
Quantity Supplied(millions of bags a week)
5
160
130
6
150
140
7
140
150
8
130
160
9
120
170
10
110
180




a. Draw a graph of the potato chip market and mark in the equilibrium price and quantity. (10 marks)
b. if the price is R6 a bag, is there a shortage or a surplus and how does the price adjust? (5 marks)

At what price should a firm produce to maximise profit in a perfectly competitive market
(1) where price equals marginal cost
(2) where price equals marginal revenue
(3) where price equals total revenue
(4) where price equals average revenue

Which of the following correctly characterises a perfectly competitive labour market?

(1) a large number of firms and a large number of workers
(2) imperfect information
(3) employees and employers having individual control over the market wage rate
(4) very few skilled workers

Which of the following is true of the profit maximizing level of employment in a perfectly competitive labour market?

(1) the marginal revenue product equals the value of marginal product
(2) the marginal revenue product equals the marginal cost of labour
(3) the marginal product equals the marginal revenue product
(4) the marginal product equals the marginal cost of labour