Microeconomics Answers

An exploration into the demand of Mobile sets in the following urban towns has supplied the following data
Towns A B C D E F G H
Population (000) 12 15 15 18 18 22 26 30
Demand for Mobile Sets 16 18 18 31 35 39 47 50
Estimate the number of T.V sets demanded in H Town with a population of 35 thousands.
Show it on the graph also

Given the following demand equation for economics books
Qx = 5000 - 500Px + 0.011 + 250Pz
(a) Assuming I = $ 20,000 and Pz = $20 What is the price elasticity of x at Px = $16 ?
(b) Assuming Px = $20 and Pz = $20 what is the income elasticity at I = $20,000 ?
(c) Assuming Px = $22 and I = $20,000 Calculate the cross elasticity at Pz = $20 ?

Speedys's Pizza produces fresh pizzas for area grocery stores that sell them for $10 each. Speedy's production cost have been estimated as
TC = 1,000 - 50Q + 5Q^2
(a) What is the firm's marginal cost function ?
(b) What output rate will maximize speedy's profits ?

Is the statement " y is a function of x" equivalent to saying that "y is caused by x"? In this context, critically evaluate the following statement: "The incidence of lung cancer is significantly higher for heavy smokers than for nonsmokers. Therefore, smoking causes cancer".

For each of the following equations, determine whether demand is elastic, inelastic, or unitary at given price
a. 4P = 100 - Q and P= $20
b. 20P = 1500 - Q and P=$5
c. P=50 - 0.1Q and P=$20

Zenith Manufacturing is considering the purchase of a new machine that would have to be paid for in annual payments of $ 5000 at the end of each of the next four years. Having this machine would increase the firm's profits by $ 2500 per year for the next 15 years. These profits also are received at the end of each year. if the interest rate is 10 percent should Zenith buy the machine ?

On Monday, Karuna borrows Rs. 1,00,000 at 8 percent annual interest with repayment to be made in monthly installments for 30 years. Overnight, the market interest rate increases to 12 percent. The lender, anxious to get its money back from Karuna so that it can be loaned out at the higher interest rate, makes Karuna the following offer: if she will double her monthly payment ( this significantly reducing the term of he loan) the lender will reduce the interest rate on the loan to 6 percent per year. Should Karuna take this offer ? Explain. ( Hint : Karuna's Opportunity cost is 12 percent per year. That is, she can invest at the same rate that the back can lend.)

Nuware Ltd., a manufacturer of plastic tables for institutional use, is considering a capital spending program involving annual expenditures of $1 Million for each of the next five years. The firm estimates that its annual profit of $1 Million would increase by 50 percent when the capital program gets completed. Assuming the firm has a 20 years life and the appropriate interest rate is 12 percent, should the capital spending program be implemented?

The HAL computer corporation is considering an increase in its annual advertising expenditure from $ 10 to $ 15 for a five-year period (i.e., in years 1 to 5). The Marketing department estimates that the increases advertising will increase profits by $ 4 in years 3 to 7 and by $ 3 in years 8 to 10 years, after which profits will return to the level they were at prior to the new program. if the firm uses a discount rate of 12 percent, will the proposes advertising program increase shareholder value ?