Economics Answers

For a consumer, the marginal utility of good A is 25 and its price is $5. The marginal utility of good B is 60 and its price is $12. The consumer has allocated his entire budget. Is this consumer maximizing his total utility?

Suppose that the following equations describe an economy.

Y = Cd + Id + G
Cd = 180 + 0.8(Y – T)
Id = 140 – 8r + 0.1Y
T = 400
G = 400
(Md/P) = 6Y – 120i MS = 6000 i = πe + r

Assume expected inflation πe = 0 and price level P = 1.

.If government purchases (G) increases to $440, everything else held constant, find new equilibrium for output and interest rate.
What are effects of fiscal expansion above on consumption and investment? find the new levels of consumption and investment.
Instead of increasing the government purchases G, find new equilibrium values for output and the interest rate if the central bank increases the money supply to 6600. What are the effects of monetary expansion above on consumption and investment,find the new levels of consumption and investment)?
Judging from your answers to the previous questions, what are the differences in the effects of expansionary fiscal and monetary policies above on Y, i, C and I?

Consider a two-period model economy populated with consumers that have the same income and the same preferences. There is also a government whose objective is to spend 60 in period 0 and 150 in period 1. This government can issue bonds in period 0. Each bond pays interest rate r. Consumers can also issue bonds at the same interest rate .Consumers’ optimal decisions, given r, imply that aggregate consumption C*0 is equal to2/3(Y0− T0) +2/3(Y1− T1)/(1 + r). Suppose Y0= 300 and that income is expected to remain at this level in period 1
a)define the competitive equilibrium of this economy
b) Show that, together, the three conditions given in a) imply that the equilibrium value of r is given by
r = (2(Y1-G1)/Y0-G0)-1.

Harpic Corp, manufactures plastic broom and mop holders, and the production function for these holders is expressed as

Q=30L^0.85K^0.20
where, Q=no of plastic holders produced per day
K= units of capital input per day
L= labor input in working hours per day
Assuming K= 1000 and L=100 calculate both the average and marginal products of Q=50K^0.6 L^0.5
the firm currently employs 20 units of capital at a cost of RM75 per unit and 25 units of labour at a cost of RM50 per unit

a)based on the current inputs used, compute the level of output
b)compute the current total costs
c)given the current input usage, is the firm operating efficiently?
d) derive the equation path equation
e) does the production function exhibits increasing, constant or decreasing returns to scale? explain.
f) determine the percentage increase in output if both labour and capital are each increased by 15%

Which one of the following statements is correct?

A. Foreign loans are made directly by the government and are not part of the BoP.
B. Exports represent a leakage from the expenditure flow.
C. If the exchange rate changes from $0.11 = R1, to $0.12 = R1, the rand depreciated.
D. When South Africans buy or sell shares on the New York stock exchange it is accounted for in the BoP.

BANANAS APPLES
Quantity (pounds) Marginal utility per dollar Quantity (pounds) Marginal utility per dollar
1 30 1 40
2 24 2 34
3 18 3 24
4 12 4 16
5 6 5 8
6 0 6 0

The table above gives Sam's marginal utility schedule for bananas and apples. Sam's fruit budget is $10.
a) If bananas cost $1 per pound and apples cost $2 per bag, what is Sam's marginal utility per dollar for all quantities of both goods?
b) What is the utility maximizing combination of bananas and apples for Sam?
c) If the price of bananas increases to $2 per pound, how does Sam's marginal utility per dollar for bananas change?
d) At the banana price of $2 per pound, what is the new utility maximizing combination of bananas and apples for Sam?
e) List two points on Sam's demand curve for bananas.

a) Describe the relationship between the marginal and average products of labor as the employment of labor increases in the short run.

Quantity (units) Price (dollars) Marginal revenue (dollars) Marginal cost (dollars)
1 22 20 6
2 20 16 8
3 18 12 12
4 16 8 18
5 14 4 28
6 12 0 40
7 10 -4 54
8 8 -8 70

b) A single-price monopolist has the demand and marginal cost schedules given in the above table. What is the profit-maximizing level of output and price?

) For a consumer, the marginal utility of good A is 25 and its price is $5. The marginal utility of good B is 60 and its price is $12. The consumer has allocated his entire budget. Is this consumer maximizing his total utility? Explain your answer.

b) "If Bill's income increases from $80,000 per year to $91,000 per year and he consumes pickup trucks and lamb chops with his money, Bill's budget line shifts outward and the increase in income means he can consume more trucks and more lamb." Is this statement true or false? Briefly explain your answer.

c) What are diseconomies of scale and why might they occur?

d) Martha's Cleaning Services is a perfectly competitive firm that currently cleans 30 offices a week and charges $20 per office, which is the going market price. Martha's marginal cost is $15. What should Martha do to increase her economic profit? Clean more offices? Raise her price? Explain your answer.

Q. A business purchases 10 digital televisions for use in its office. When the televisions arrive at the workplace the owner of the business decides that one will be taken home. The total cos of the acquisition was $26,500 (GST Inclusive).Describe how you would process this to comply with taxation reporting requirements. How much input tax credit could be claimed, what would be the BAS code for the Acquisition?

Suppose our company has a beta of 1.5. The market risk premium is expected to be 9%, and the current risk-free rate is 6%.
•We have used analysts’ estimates to determine that the market believes our dividends will grow at 6% per year and our last dividend was $2.
•Our stock is currently selling for $15.65. What is our cost of equity?