Economics Answers

Discuss the role of fiscal policy in maintaining macroeconomic stability, rapid economic

growth and a large market for insurance.

Which competitive markets can use price discrimination as a pricing strategy and why?

In what ways three degrees of price discrimination are different from each other? How can

insurance industry use this practice in extracting surpluses from consumers?

Construct graph and explain income and substitution effect of a price change for food

(on X-axis) and cloth (on Y-axis) when a) food is a normal good and b) food is an inferior

good. Suppose price of food is continuously decreasing, with no change in the price of cloth

and income, what curves can you derive from this change?

Discuss how management utility maximization goal of a firm create principal-agent

problem? How can this problem be solved in an insurance company? A monopolist has a cost

function 200q + 15Q2

and faces a demand function given by P= 1200 – 10Q. Calculate total

revenue, marginal revenue, output and price that maximize profit-maximizing? What is its

maximal profit? Explain with the help of graphs?

Suppose a country’s debt rises by 10% and its GDP rises by 12%.

Use the demand function below to answer the questions that follow

𝑸𝒅𝒙 = 𝟑 − 𝟏 𝑷𝒙 − 𝟓𝑷𝒚 + 𝟐𝑷𝒁 − 𝟐 𝑴 𝟒𝟑 𝟏𝟎

Where 𝑷𝒚 and 𝑷𝒛 are prices of related goods and M is income. Using the demand function;

I. Identify which type of goods is 𝑷𝒛 and explain it

II. Identify which type of goods is M and explain it

III. Identify which type of goods is 𝑷𝒚 and explain it

IV. Interpret 𝑷𝒙

7. Suppose the velocity of money is constant and potential output grows by 5% per year. For each of the following money supply growth rates, what will the inflation rate be? a. 4% b. 5% c. 6%

A. Find the marginal utility of the following and explain:

• Quantity of burger = 1
• Total Utility = 53
• Marginal Utility = ?

2.

• Quantity of burger = 2
• Total Utility = 65
• Marginal Utility = ?

3.

• Quantity of burger = 3
• Total Utility = 69
• Marginal Utility = ?

4.

• Quantity of burger = 4
• Total Utility = 74
• Marginal Utility = ?

5.

• Quantity of burger = 5
• Total Utility = 83
• Marginal Utility = ?

) Given the supply function, P = 500 + 2Q, where P is the price of a bottle of a perfume,

Q is the number of litres supplied.

(a) Graph the supply function. What is the meaning of value of the vertical intercept.

(b) What is the value of Q when P = k750?

When the marginal cost curve is above the average total cost curve:

A.  the average fixed cost curve is rising.

B.  the average fixed cost curve is horizontal.

C.  the marginal cost curve is falling.

D.  the marginal cost curve reaches a minimum.

E.  the average total cost curve is rising.