Economics Answers

The bubble tea cafe wants to use advertisements in order to increase sales. They currently choosing between two advertising media : magazine ads and a youtube ad. The expected profit, in millions, is summarized in the two tables below
profit probability
30 0.05
40 0.20
50 0.50
60 0.20
70 0.05
compute for the expected value each probability in each decision

Describe some of the opportunity cost when you decide to do the following : 1. Attend university instead of taking a job. 2. Watch a movie instead of studying for a quiz. 3. Ride commercial bus instead of driving your own car. 4. More people choose to get graduate degree when the job market is poor. 5. More people choose to do their own home repair when the economy is slow and monthly salaries are down . 6. Few students enrol in lectures that start before 6:30 am

for each of the following situations, decide whether somewhere has increasing, constant and diminishing marginal utility. is. the more economics classes somehow takes the more she enjoys the subject. and the more classes she takes, the easier each one gets, making her enjoy each additional class even more than the one before

5. You are the manager of a monopoly and your demand and cost functions are given by
P = 225 - 2Q
and
c(Q) = 1,100 + 3Q2
a. What price-quantity combination maximizes your firm’s profits?

(a) Look around you at industries/product that you see in the marketplace and identify at least one that you think is a monopoly. (Do NOT use a public utility or other natural monopoly) Do you think that, as suggested in the book, prices are higher and output lower with a monopolist than with a highly competitive firm?
(b) Can you think of instances in which a monopoly has been exposed or opened up to more competition and prices have gone down and quantity of output gone up as a result? Be specific in your answer.
(c) Consider a specific product in the garment industry. How close is it to a monopoly for specific items, maybe in specific cities or neighborhoods?

What is the opportunity cost of attending university instead of taking a job?

1. The text discusses the Government’s “Ability to Coerce”. Describe why this is important and provide two examples of how/why this happens.

Calculate the following :
Quantity / total fixed cost /Total variable cost / Total cost / Average cost/ Marginal cost
25 10 18 ? ? ?
26 10 20 ? ? ?
27 10 21 ? ? ?

3. A consumer’s utility function is given by U = XY, where MUX = Y and MUY = X.
a. What is the utility derived from 1 unit of X and 2 units of Y? What is the utility derived from 2 units
of X and 1 unit of Y? What is the utility derived from 5 units of X and 2 units of Y?
b. How does the consumer rank the following bundles?
Bundle Quantity of X Quantity of Y
A 2 2
B 10 0
C 1 5
D 3 2
E 2 3
c. Graph indifference curves that show the bundles of X and Y for which U = 6 and U = 8. Is the “more
is better” assumption satisfied for X and Y?

4. Chrissy spends her income on fishing lures (L) and guitar picks (G). Lures are priced at $2, while a
package of guitar picks cost $1. Assume that Chrissy has $30 to spend and her utility function can be
represented as U(L, G) = L0.5G0.5.
a. For this utility function, find the MUL and MUG.
b. What is the optimal number of lures and guitar picks for Chrissy to purchase? How much utility
does this combination bring her? (Put fishing Lures [L] on the horizontal axis).
c. If the price of guitar picks doubles to $2, how much income must Chrissy have to maintain the same
level of utility?