Economics Answers

You win $100 in a basketball pool. You have 

a choice between spending the money now or 

putting it away for a year in a bank account that 

pays 5 percent interest. What is the opportunity 

cost of spending the $100 now?

Three managers of the Magic Potion Company

are discussing a possible increase in production.

Each suggests a way to make this decision.

Harry: We should examine whether our

company’s productivity—gallons

of potion per worker—would rise

or fall.

Ron: We should examine whether our

average cost—cost per worker—

would rise or fall.

Hermione: We should examine whether

the extra revenue from selling

the additional potion would be

greater or smaller than the extra

costs.

Adam loves UNAM shandy which he makes by combining one glass of oshikandela and two scoops of ice cream. Eve is on the diet that assigns points to food and drinks. One glass of oshikandela is one point and one scoop of ice cream is one point. She can consume any combination of oshikandela and ice cream as long as the total number of points is two. (a) What type of goods are oshikandela and ice cream for Adam? Show his indifference curve on a graph. (b)What kind of goods are Oshikandela and ice cream for Eve? Show her indiffernce curve on a graph.

4. The following relations describe monthly demand and supply for a computer support ser-

vice catering to small businesses.

Q D = 3,000 - 10P

Q S = -1,000 + 10P

where Q is the number of businesses that need services and P is the monthly fee, in dollars.

a. At what average monthly fee would demand equal zero?

b. At what average monthly fee would supply equal zero?

c. Plot the supply and demand curves.

d. What is the equilibrium price/output level?

e. Suppose demand increases and leads to a new demand curve:

Q D = 3,500 - 10P

What is the effect on supply? What are the new equilibrium P and Q?

f. Suppose new suppliers enter the market due to the increase in demand so the new supply

curve is Q = –500 + 10 P. What are the new equilibrium price and equilibrium quantity?

g. Show these changes on the graph.

11. Following are three sample equations. Plot them on a graph in which Q is on the vertical

axis and P is on the horizontal axis. Then transform these equations so P is expressed in

terms of Q and plot these transformed equations on a graph in which P is on the vertical

axis and Q is on the horizontal axis.

a. Q = 250 - 10P

b. Q = 1,300 - 140P

c. Q = 45 - 0.5P

Draw on a graph and explain in words the excess capacity and markup in monopolistic competition versus perfect competition. Show the deadweight loss and mark on the graph.

Describe the challenges faced by human resource managers in dealing with labor economics issues in todays organizations. (8marks)

Diana consumes potatoes and other goods (potatoes is an inferior good). Using an indifference curve analysis show the effects that determine Diana s final consumption of these two goods. (Hint price for potatoes increase).

Determine the various methods used by human resource managers to cut labor costs in their organizations (7Marks)

The consumer is not choosing the best affordable (feasible) bundle of goods x and y. Explain why? MU_{y /}P_x MU_{y /}P_y