Economics Answers

1. After economics class one day, your friend suggests that taxing food would be a good way to raise revenue because the demand for food is quite inelastic. In what sense is taxing food a “good” way to raise revenue? In what sense is it not a “good” way to raise revenue?

Given that the total cost of producing a tin of milk is TC=wL+rK, where w,l,r and k are rent,labor,rent and capital, Find the maximum amounts of capital and labor required to produce a tin of milk?

1. Given that the demand curve of a monopolist are x=50-0.5p . The cost function “c”=50+40x . The goal of the firm is profit maximization where profit = Tr -Use equal marginal principle to get the quantity demanded , price and show that the second order condition for profit maximization is fulfilled (15marks)get the profit for the monopoly as well

2. x=50-0.5p.
X1=32-0.4p1
X2=18-0.1p2
Where monopolist practice price discrimination x1+x2=x
C=50+40x=50+40(x1+x2)
aFind monopolists profit
Find mr in each market
Find price in each market
Find Tc for the industry

A market demand is given by QA = 200 – 3PA + 2PB + 0.04M, where QA is the quantity demanded of good A, PA is good A’s price, PB is good B’s price, and M is the average good A’s consumer monthly income. If PA = $12, PB = $10, and M = $2,500,

a. calculate good A’s (point) own-price elasticity;

b. calculate good A’s (point) cross-price elasticity;

c. calculate good A’s (point) income elasticity;

d. Are A and B complements or substitutes? Explain how you know.

2. Famous Cinema Theatres sell the movie tickets for $16 per ticket for evening screenings and sell 250 tickets a night on average. They estimate that the price elasticity of demand for tickets is (negative) 0.8.

Calculate the expected number of tickets sold if they reduce the ticket price to $14.

2. Suppose that MPC = 0.9 and MP to import = 0.10 and an autonomous increase in Exports = $10 . Calculate :
a. The level of the multiplier
b. The change in the level of imports
( Hint : k = 1 / 1- MPC + MPM )

1. Rank the following proposals in terms of their ability to increase the equilibrium level of income :
a- Government spending and taxes increase by x
b- Government spending and taxes decrease by x
c- Government spending increase by x
d- Taxes increase by x
2. Suppose that MPC = 0.9 and MP to import = 0.10 and an autonomous increase in Exports = $10 . Calculate :
a. The level of the multiplier
b. The change in the level of imports
( Hint : k = 1 / 1- MPC + MPM )

3. A market demand is given by QA = 200 – 3PA + 2PB + 0.04M, where QA is the quantity demanded of good A, PA is good A’s price, PB is good B’s price, and M is the average good A’s consumer monthly income. If PA = $12, PB = $10, and M = $2,500,

a. calculate good A’s (point) own-price elasticity;

b. calculate good A’s (point) cross-price elasticity;

c. calculate good A’s (point) income elasticity;

2. Famous Cinema Theatres sell the movie tickets for $16 per ticket for evening screenings and sell 250 tickets a night on average. They estimate that the price elasticity of demand for tickets is (negative) 0.8.

Calculate the expected number of tickets sold if they reduce the ticket price to $14.

Explain why a firm $1 million in the bank would care about the market interest rate when investing $10 million into a new building, after all they do not need to borrow money. When would they undertake this investment project?