Economics Answers

suppose that a firm produces 200 000units a year and sells them all for N$10 each. the explicit costs of production are N$1 500 000 and the implicit costs of production are N$300 000. what is the firms accounting profit and economic profit?

Sita expects her future earnings to be worth Rs. 100. If she falls ill, her expected future earning will be Rs. 25. There is a belief that she may fall ill with probability of of remaining in good health is while the probability Let her utility function be given as U(y) = suppose that an insurance company offers to fully insure Sita against loss of earnings caused by illness against an actuarially fair premium. (a) Will Sita accept the insurance? Explain. (b) What is the maximum amount that Sita would pay for the insurance?

5. A consumer’s utility function is given as U(x,y) = In (x+2y) Where x and y are two goods of consumption. (a) Find the indirect utility function of the consumer. (b) Examine if Roy’s law is satisfied by the consumer’s demand function for y. (c) Find the expenditure function of the consumer e(p,u) where price of x = 1 and price of y = p. (d) Find the Hicksian demand function hy (p,u) for commodity y, where the price of x is 1 and the price of y is p.

Which of the following are examples of the limitations of GDP? That is, which of these are not accounted for by the computations of GDP?
A) Highway Repairs done by the government
B) The value of leisure time
C) The import and sale of illegal drugs from South America
D) The value of housing services provided by owner-occupied homes

A consumer’s utility function is given as U(x,y) = In (x+2y) Where x and y are two goods of consumption. (a) Find the indirect utility function of the consumer. (b) Examine if Roy’s law is satisfied by the consumer’s demand function for y. (c) Find the expenditure function of the consumer e(p,u) where price of x = 1 and price of y = p. (d) Find the Hicksian demand function hy (p,u) for commodity y, where the price of x is 1 and the price of y is p.

Write short notes on any two of the following: (a) Envelope theorem (b) Hidden information (c) Actuarially Fair Premium

Discuss the approaches adopted by Pigou and Pareto for analyzing the problem of welfare economics

1. An economy comprises two consumers, 1 and 2, with two consumption goods bi-cycles (b) and wheat . Both consumers have the same utility function μ Bi-cyclesandwheat areproducedbytwofirmswhichuseonlylabouraccordingtotheproductionfunctions b =l and l Both firms are owned by consumer 1, and consumer 2 owns 200 units of labour. (a) Find the production possibility frontier for this economy. (b) Find the competitive equilibrium. (c) Find competitive equilibrium if every consumer owns 100 units of labour and owns one firm. (d) Find the Pareto efficient allocations for this economy. 2. Assume that there are four firms supplying a homogenous product. They have identical cost functions given by C (Q) = 40 Q. If the demand curve for the industry is given by µ = 100 – Q, find the equilibrium industry output if the producers are Cournot competitors. What would be the resultant market price? What are the profits of each firm? Section B Answer all the questions from this section. 5×12=60 (a) Distinguish between pure strategy Nash equilibrium and mixed strategy equilibrium. When would you use mixed strategy equilibrium? (b) Find all the Nash equilibrium of the following game: Player 2 Left Right Player1 Up (5,4) Down (1,3) (4,1) (2,2)

Assume that there are four firms supplying a homogenous product. They have identical cost functions given by C (Q) = 40 Q. If the demand curve for the industry is given by µ = 100 – Q, find the equilibrium industry output if the producers are Cournot competitors. What would be the resultant market price? What are the profits of each firm?

a. Using the midpoint method (show your work), calculate the price elasticity of demand when the price of an ice cream cone rises from $1 to $2. What does this estimate imply about the price elasticity of demand for ice cream cones?