Microeconomics Answers

In the case of profit maximising firms, price

[1] equals average fixed cost.

[2] equals marginal cost.

[3] exceeds marginal revenue.

[4] equals average variable cost.

The long-run result of producing where P = MC in an industry where there is free entry or exit is

[1] negative economic profit.

[2] zero economic profit.

[3] inefficient production.

[4] positive economic profit

If the government imposes a minimum wage at a level above the labour market's equilibrium wage,

[1] the quantity demanded of labour will be greater than the quantity supplied.

[2] the quantity demanded of labour will be less than the quantity supplied.

[3] anyone who wants a job at the minimum wage will be able to find one.

[4] employers will face a shortage of willing workers.

A profit-maximising producer will hire labour to the point where

[1] marginal revenue product equals the wage rate.

[2] marginal revenue equals zero.

[3] labour and capital costs are equalised

[4] its marginal product equals marginal revenue.

1.     Producers in three countries have formed a cartel to sell a highly-priced product. Suppose the world demand for the product is consistent with the equation:

P=80-0.005Q_T

NB: Q_T is the total cartel sales.

The producers have managed to maximise profit at a price of R70 per unit. Suppose the members have the following total cost functions;

Member 1: TC=7382 + 10Q + 0.05Q²

Member 2: TC= 9374 + 20Q + 0.02Q²

Member 3: TC=7432 + 30Q + 0.03Q²

Tasks: Derive:

a)     Marginal revenue

b)    Output of member 1

c)     Output of member 2

d)    Output of member 3

e)    Total cartel output.

1.     Assume that the market demand and the costs of the duopolists are:

P=120-0.4(Q_A + Q_B)

TCA=5Q_A

TCB= 0.2Q²_B

Also assume that firm B is the sophisticated leader, Determine:

1.     The reaction curve of A

2.     The reaction curve of B

3.     The profit function of A

4.     Stackelberg equilibrium output level for firm A

5.     Stackelberg equilibrium output level for firm B

6.     The market price.

Define and discuss local examples for the following within the context:

a. Indifference Curves

b. Marginal rate of substitution

c. Indifference curves and transitivity

d. Convexity of indifference curve

e. Utility and the marginal rate of substitution

f. Non Homothetic Preferences

g. Homothetic Preferences

h. Optimisation Principle

I. Lump Sum Principle

J. Homogeneity of Expenditure functions

On 30^th March 2020, the Malaysian government for the first time impose a price ceiling of RM1.50 on face mask. Illustrate the price ceiling in the diagram that you have drawn in Question 1. Explain what problem(s) the government has caused by imposing the price ceiling

As South Africa has a large contingent of unemployed and low skilled workers how do you see the integration process affecting the mismatch between the demand and supply of labour within the country?