Microeconomics Answers

Suppose the government increases its spending and that net exports increase. In two or three sentences, explain how these actions affect economic performance.

1 Consider two markets; the market for petrol in Australia and the market for used Holden Commodores in Australia. For the purposes of this question please regard Holden Commodores as large cars that consume a lot of petrol. Suppose that a war in the Middle East causes the price of crude oil to increase (crude oil is the major input used to produce petrol). To answer this question, draw two demand and supply diagrams (as specified below) and for each diagram please provide a written explanation. For each diagram you must label which market it refers to, show clearly how the demand and/or supply curve shifts, and clearly show how the equilibrium price changes.
(a) First, draw a diagram showing what happens in the Australian petrol market (4 marks).
(b) Then, draw another diagram showing what happens in the Australian used (second-hand) Holden Commodore market (6 marks). Hint: Think carefully what happens to the supply curve as well as what happens to the demand curve.

The demand equation is estimated to be 50 – 3P + 2Po , where Po is the price of some other good. Assune the average value of P is $ 3 and the average value of Po is $ 6.

a. what is the price elasticity at the average values of P and Po? how should the price of the good be changed to increase total revenues ?
b. what is the cross elasticity at the average values of P and Po? what is the relationship between the two goods?
c. if the equation is correctly estimated, is the good inferiod, a necessity, or a luxury? Explain

. If the government sets a price floor in the market what is the difference between the quantity demanded versus quantity supplied? What do we call this?

Explain the concept of externalities and discuss one type of externality that may be encountered in an economy

uppose the demand curve is: P = 200 – 2Qd and the supply curve is: P = 40 + 2Qs. If the government imposes a price ceiling at $50, consumer surplus will be

suppose the demand for Frisbees is given by
Q=100-2p
and the supply by
Q=20-6p
a)what will be the equilibrium price and quantities for Frisbees?
b)suppose the government levies a tax of rs:4 per frisbee.Now what will the equilibrium quantity the price consumers will pay & the price firm will receive?
c)how would your answer to part a &b change if the supply were insteadQ=70+P

4. The Regional Clear Air Incentives Market (RECLAIM) program is an emissions trading program for nitrogen oxide NOx) and sulfur oxide (SOx) emissions in Southern California. One early trade of these “pollution” permits was valued at $1.27 million for 1,700 tons of NOx. One element of this program is that the quantity of allowable pollution per permits decreases over time. So for example if a permit allows 1000 tons of NOx emissions in 1994, it may only allow 500 tons of emissions in 2004. Carefully describe the factors that would influence the market value of RECLAIM pollution permits over time. Would you ever expect the market value of permits to fall to zero? Why or why not?

QL=-L^3+8L^2+12 then find (a)optimal level of labour employment (b)optimal out put level(c) labour employment at which maximum out put is produced (hint;TPL is maximum at MPL=0)

Find the equilibrium of L and K subject to a given output:

minimize cost: C=40K+20L subject to Q=60LK = 3000