Microeconomics Answers

Chirpy Grilled Chicken (a fast food outlet) operate in a monopolistically competitive industry and will spend about R10m increasing the range of meals it offers, in 2019.
4.1 With the aid of well labelled diagrams, explain Chirpy Grilled Chickens` profit maximising position, in the short-run and how this may change in the long-run.
4.2 Explain the key features of the industry in which Chirpy Grilled Chicken operate in comparison to the South African stock market.

Suppose that as a result of the listeriosis outbreak, the department of health has warned against the consumption of Viennas. Explain using a properly labelled diagram, the effect of this in the market for Viennas, ceteris paribus

In the market for public transport, which of the following variables would decrease demand, ceteris paribus?
A. An increase in the price of private motor vehicles.
B. A decrease in the price of private motor vehicles.
C. An increase in price of private motor vehicle service plans.
D. A decrease in the price of bus tyres.
E. An increase in the price of motorbikes, a substitute.

Assume that the market price for a 5kg bag of rice is R80 and the government has announced that a 5kg bag of rice can not be sold for less than R100. With a well labelled diagram explain the effect the above government decision will have in the market

Key features of a monopolistic competitve industry compared to the south african stock market

Kofi and Ama have 120 hours each and they can spend their time planting Rice or Maize.
You are told that the opportunity cost of producing one bag of rice for Ama is 1/3 bag of
maize and the opportunity cost of producing one bag of rice for Kofi is ¼ bag of maize.
Ama can produce 6 bags of maize when she uses all her resource for maize production
and 1Kofi can produce 8 bags of rice when he uses all his resource .Use this to answer
the following questions:
a) If Ama decides to use all her resources for rice production, how many bags of rice will she
produce?
b) If Kofi decides to use all his resources for maize production how many bags of rice will he
produce
c) Who has the comparative advantage in planting rice?
d) Who has the comparative advantage in planting maize?
e) What is Kofi’s opportunity cost for planting maize?
f) What is Ama’s opportunity cost for planting TWO bags of rice?
g) Who has Absolute Advantage (AA) in Maize and who has AA in Rice? �

A country produces ethanol from sugar, and the land used to grow sugar can be used to grow food crops.Suppose that country’s production possibilities for ethanol and food crops are as follows.
Ethanol(barrels Food crops(tons per
per day) day)
70 0
64 1
54 2
40 3
22 4
0 5
1) a) Draw a graph of the country’s production possibilities curve and explain how the graph illustrates scarcity.
2) b) If this country produces 49 barrels of ethanol a day, mhow much food must it produce to achieve production efficiency?
3) c) why does this country face a trade off on its PPC?

it is orthodox to say people’s desire has no boundary from the time past, even in the face realistic limited resources, individual agents never stop to want more of economic output”

Price effect is the summation of income effect and substitution effect

Assume the market price for a 5 KG bag of rice is R80 and the government has announced that a 5KG bag of rice cannot be sold for less than R 100.
with the aid of a well labelled diagram, explain the effect the above government decision will have in the market for rice.