Microeconomics Answers

an early freeze in California siurs the lemon crop. Explain what happens to consumer surplus in the market for lemons

You are given the production function: Q(K,L) = 4K^0.6L^0.4 a) What is the average product of labour, holding capital fixed at K? Simplify fully [6 marks] b) What is the marginal rate of technical substitution (MRTS)? Simplify fully [13 marks] c) Does the above function exhibit increasing, decreasing or constant returns to scale? Illustrate why and explain what this means [6 marks]

Fatima Zehra is the only person who sells a TV show cards. Below is the chart of her prices

and number of cards sold.

Price (in Pak Rupees) Quantity sold (in numbers)

24 10,000

22 20,000

20 30,000

18 40,000

16 50,000

14 60,000

Fatima Zehra can produce the cards with Rs. 1000 fixed cost and Rs.5/card variable

cost.

a). Find total revenue for each quantity stated in above table?

b). Find marginal revenue for each quantity?

c). What quantity of cards would maximize her profit?

d). What would be the price and profit at the level of profit maximization?

e). If you are hired as Fatima Zehra’s agent, what price would you suggest her to

charge (use logical reasoning for your answer)?

Fatima Zehra is the only person who sells a TV show cards. Below is the chart of her prices

and number of cards sold.

Price (in Pak Rupees) Quantity sold (in numbers)

24 10,000

22 20,000

20 30,000

18 40,000

16 50,000

14 60,000

Fatima Zehra can produce the cards with Rs. 1000 fixed cost and Rs.5/card variable cost?

Turnips are an inferior good. A rise in the price of​ turnips, all other factors remaining the​ same,

Question content area bottom

Part 1

A.

increases the supply of turnips.

B.

increases the quantity demanded of turnips.

Your answer is not correct.

C.

increases the quantity supplied of turnips.

This is the correct answer.

D.

decreases the quantity supplied of turnips.

E.

decreases the demand for turnips.

Suppose Moses (M) and Rose(R) are substitutes for each other. Suppose also that their supplies are fixed in the short run ( and and that their respective demands are given by the following equations:

P_M=900-Q_M+0.6P_R

P_R=500-Q_R+0.6P_M

a) What are the equilibrium prices of moses and rose

b) What if discovery of new seeds of moses causes a doubling of moses to 160. How will this discovery affect the prices of moses and rose

c) Graphically show the how this discovery affects the markets for moses and rose bringing out the feedback effects using general equilibrium analysis?

d) Using (c) compare the effect of this discovery on price when using partial equilibrium analysis and when using general equilibium analysis

e) Using (c) compare the effect of this discovery on quantity when using partial equilibrium analysis and when using general equilibium analysis

Suppose the marginal rate of transformation (MRT) of orange for banana is 4 and the MRS of orange for banana is 2.

a) Explain why the two goods are not distributed efficiently

b) What needs to be done for there to be output efficiency? Show this graphically

Suppose there are 2 consumers (AMOS and DENIS) consuming 2 goods fruits and vegetable. There are a total of 8 fruits and 12 vegetables. Amos has 6 fruits and 3 vegetables . Denis has 9 vegetables and 2 fruits .

a) Show this allocation on the edgeworth box

b) The marginal rate of substation (MRS) of fruits for vegetables (rate at which consumers reduce vegetables to increase fruits by 1 ) is 4 for Denis and ¼ for Amos . Is this allocation pareto efficient? Why?

c) Show that an allocation that makes both consumers better off is not necessarily an efficient allocation. Show how the MRS change and explain the change

a) Consider the competitive market for basket ball and football . The two markets are closely related because the two are complements. Suppose a tax is imposed on basket balls causing an increase cost of production. Using general equilibrium analysis, analyze the effect of this on the 2 market

Consider 2 firms in an oligopoly industry that compete on output choice. They face an inverse demand function given by

p= 120 - Q

The cost functions for the 2 firms are given by 

TC₁=TC₂=30

Determine the equilibrium output, price and profit for each firm assuming the two firms collude