Microeconomics Answers

Assuming that x is a normal good and y is an inferior good, decompose the total effect (a) of a reduction in the price of a normal good (b) of an increase in the price of y into the income and substitution effect components? What will happen in each case if the income effect is too large?

Why demand curve slope downward to right?

A certain town in Kerala obtains all of its electricity from one company, South Electric. Although the company is a monopoly, it is owned by the citizens of the town, all of whom split the profits equally at the end of each year. The CEO of the company claims that because all of the profits will be given back to the citizens, it makes economic sense to charge a monopoly price for electricity. Do you agree with the CEO? Why or Why not? If the gains of the producers from monopoly power could be redistributed to consumer, would the social cost of monopoly power be eliminated? What are the important measures you suggest to control monopoly power?

3. (a) A firm produces margarine using vegetable oils and wooden paddles. Themore paddles the firm uses, the more efficiently the oils can be mixed, andso the less oil is required. The table below presents a variety of ways thatthey could produce 100kg of margarine.Oils 100 200 300 400 500 600 750 1000Paddles 60 30 20 15 12 10 8 6The price of paddles (and workers to use them) is £15, and the price of theoils (per litre) is £1.(i) Using a table, calculate the cost of each of these methods. Which method is cheapest and how much does it cost? [4 marks](ii) Draw the isoquant for 100kg of margarine and the isocost corresponding to the cheapest method above. [4 marks](iii) Can you say anything about whether the method you identified in (i) minimises costs? [3 marks](iv) A fellow student suggests to you that it is technically efficient to produce 100kg of margarine. Do you agree? [3 marks]

If I have 2 normal goods at $5 and $10 respective and a budget of $200 where I will purchase 20 of A and 10 of B. Then say the next period I go to buy the same normal goods but their price fluctuated to $2.50 and $20 respectively would I be more satisfied with good A costing $5 or $2.50 when I can buy just as many of each good within my budget constraints still? And if I were to be happier with one of the options why?

You are to prepare a one-page briefing note for the Chief Secretary to the Treasury that explains the major challenges involved in the design of an efficient and equitable tax and benefit system with reference to economic theory and suggests ways in which the current UK system might be improved.

A natural monopoly is typically characterised by what?

Smith and Wesson have written a new managerial economics book for which they receive royalty payments of 15 percent of total revenue from sales of the book. Because their income is tied to revenue, not profit, they want the publisher to set the pricensonthat the total revenue is maximized. However the publishers objective is maximum profit. If the total revenue function is TR=100,000Q-10Q^2 and the total cost function is TC=10,000+20Q+Q^2 determine A) the output rate that will maximize total royalty revenue and the amount of royalty income hat smith and Wesson would receive. B) the output rate that would maximize profit to the publisher. Based on this rate of output, what is the amount of royalty income smith and Wesson would receive? Compare the royalty income of smith and Wesson to that determined in part

What is the diagrammatic representation of scarcity and choice go together? As this question has to be appeared in 10 marks how to expand the answer?

what is black market in economics?