Microeconomics Answers

A purely competitive firm finds that the market price for its product is $25.00. It has a fixed cost of $100.00 and a variable cost of $15.00 per unit for the first 50 units and then $30.00 per unit for all successive units.

Suppose Ashok's utility function is u={r/1000}1/2. His initial income when healthy is36000 . however there is 50% chance that he will face financial loss on being ill and income is likely to reduce by 20000.1) find the expected value of his income? 2) what expected utility he will have given the possible state of his health? 3) what is the risk premium he will be willing to pay to cover the risk of sickness.

Suppose demand for good A is given by DA = 500 - 10 Pa + 2 Pb + 0.70I where Pa is the
price of good A, Pb is the price of some other good B, and I is income. Assume that Pa is
currently $10, Pb is currently $5, and I is currently $100.
a. What is the elasticity of demand for good A with respect to the price of good A at the
current situation? Interpret the nature of elasticity of demand.

Suppose demand for good A is given by DA = 500 - 10 Pa + 2 Pb + 0.70I where Pa is the
price of good A, Pb is the price of some other good B, and I is income. Assume that Pa is
currently $10, Pb is currently $5, and I is currently $100.
a. What is the elasticity of demand for good A with respect to the price of good A at the
current situation? Interpret the nature of elasticity of demand.

what happens to the price and quantity of a product when it is banned from being sold in certain arears

21. Which of the following scenarios is consistent with a price change for a normal good?
a. The substitution effect is +2 and the income effect is -2.
b. The substitution effect is +2 and the income effect is +1.
c. The substitution effect is -2 and the income effect is -2.
d. The substitution effect is -2 and the income effect is +1.
e. none of the above


22. Which of the following scenarios is consistent with a price change for an inferior good?
a. The substitution effect is +2 and the income effect is -2.
b. The substitution effect is +2 and the income effect is +1.
c. The substitution effect is -2 and the income effect is -2.
d. The substitution effect is -2 and the income effect is +1.
e. none of the above

In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X.


9. Refer to the above. An increase in income, if X is a normal good, will: A) increase D, increase P, and increase Q. B) increase D, increase P, and decrease Q. C) increase S, increase P, and increase Q. D) decrease D, increase P, and increase Q.

Fill in the other columns of the table by calculating the marginal utilities for goods X and Y and the ratios of marginal utilities to price for the two goods. Assume that the price of both goods X and Y is $3. Be sure to use the “midpoint convention” when you fill out the table.

Based on quarterly data from 1995:I to 1998:IV, MTR Foods estimates that potato chip sales can be projected using the equation S, = 50,00,000 + 1,00,000t where 1995:I is period 1. Actual fourth-quarter sales in thousands were as follows:
1995 5,450
1996 5,860
1997 6,270
1998 6,680
a. Project sales for the first three quarters of 1999.
b. Without using a seasonal adjustment,Project sales for 1999:IV.
C.Project Seasonally adjust sales for 1999: IV

Over a six -year period,National Automobiles' sales ( in rupees crores) were 200,220,180,200,190,and 210.
(a) Using a smoothing constant of 0.5,forecast sales for the next period.
(b) Graph the original data. Based on the results from part(a),graph the forecasted sales.Do the smoothed results have less variability than the original data?
(c) Forecast next period sales using smoothing constant of a = 1.0 and a = 0.0. What are the implicit assumptions associated with these smoothing constants?