Economics Answers

1. The Bok Chicken Factory is trying to figure out how to minimize the cost of producing 1200 units of chicken parts. The production function is q = 100L0.5 K0.5. The wage rate is birr 9 per hour and the rental rate on capital is birr 4 per machine hour.

A. Find the minimum cost of producing 1200 units.

B. Find the maximum output that can be produced for a total cost of birr 720.

following are the demand and supply equations for a consumer good: (20)

Qd = 300,000/P (Qd = quantity demanded)

Qs = 30P (Qs = quantity supplied)

(P = Price)

Find the market clearing price and the quantity at the equilibrium. Also sketch the demand and supply curves.

A dozen eggs cost $0.88 in January 1980 and $2.11

in January 2015. The average wage for production

workers was $7.58 per hour in January 1980 and

$19.64 in January 2015.

a. By what percentage did the price of eggs rise?

b. By what percentage did the wage rise?

c. In each year, how many minutes did a worker

have to work to earn enough to buy a

dozen eggs?

d. Did workers’ purchasing power in terms of eggs

rise or fall?

The chapter explains that Social Security benefits are

increased each year in proportion to the increase in

the CPI, even though most economists believe that the

CPI overstates actual inflation.

a. If the elderly consume the same market basket

as other people, does Social Security provide the

elderly with an improvement in their standard of

living each year? Explain.

b. In fact, the elderly consume more healthcare com-

pared to younger people, and healthcare costs

have risen faster than overall inflation. What

would you do to determine whether the elderly

are actually better off from year to year?

The inverse supply for coal is P^s=2+Qs. The inverse demand function for coal is P^d=20-2Q^d. By how much does the consumer surplus increases when a $3 subsidy to consumption is introduced? (Assume that no tax was in place before the subsidy is introduced.)

Clayra allocates P 500.00 of her weekly food budget between two goods: X and Y. Suppose Good X costs P50.00 per piece and Good Y, P100.00 per piece. Construct Clayra’s budget constraint table. And Draw her budget line.

6.

What difficulties arise in the use of community

indifference curves in trade theory? How can these

difficulties be overcome?

5.What does a community indifference curve measure? What are its characteristics? What does the

slope of an indifference curve measure? Why does it decline as the nation consumes more of the commodity measured along the horizontal axis?

4.

What is the reason for increasing opportunity costs?

Why do the production frontiers of different nations

have different shapes?

3. Why does a production frontier that is concave from

the origin indicate increasing opportunity costs in

both commodities? What does the slope of the

production frontier measure? How does the slope change as the nation produces more of the commodity measured along the horizontal axis? more

of the commodity measured along the vertical axis?