Production possibility frontier bowed outwards

Assignment Help Microeconomics
Reference no: EM13146542

Question 1:

Suppose that oil prices rise sharply for years as a result of a war in the Middle East. Illustrate with a diagram what happens to the: 

Demand for automobiles?

Demand for home insulation?

Demand for coal?

Demand for tyres?

Demand for bicycles?

Explain the impact of external costs and external benefits on resource allocation;

Why are public goods not produced in sufficient quantities by private markets?

Question 2:

 

Explain why scarcity forces individuals and society to incur opportunity costs. Give specific examples.

 

Suppose a chocolate bar manufacturer promotes its products by advertising and opportunity to win a 'free car'. Is this car free because the winner pays zero for it?

 

Why is the production possibility frontier bowed outwards?

 

Question 3:

 

In some large cities, motorists pay a fee when they bring their vehicles into the busiest part of the city (congestion charge).

 

(a) Illustrate with a diagram and explain how this charge is an example of the price system at work;

 

(b) How do you think that the authorities would determine the level of the charge if they have a particular target for the reduction in the number of vehicles entering the congestion charge zone?

 

(c) Given that revenues from these congestion charges are invested in the city's transport system, how will this affect the charge level holding all other variables constant?

 

Question 4: 

 

Suppose the income elasticity of demand for pre-recorded music compact disks is +7 and the income elasticity of demand for a cabinet maker's work is +0.7. Compare the impact on pre-recorded music compact disks and the cabinet maker's work of a recession that reduces consumer incomes by 10 per cent.

 

How might you determine whether MP3 music players and the pre-recorded music compact

discs are in competition with each other?

Interpret the following Income Elasticities of Demand (YED) values for the following and state

if the good is normal or inferior;

 

YED= +0.8

 

YED= -2.4

 

(d) Interpret the following Cross-Price Elasticities of Demand (XED) and explain the relationship between these goods.

 

XED= + 0.85

 

XED= -4.5

 

Question 5:

Discuss the following statement: 'In the real world there is no industry which conforms precisely to the economist's model of perfect competition. This means that the model is of little practical value'.

Illustrate with a diagram and explain the short-run perfectively competitive equilibrium for both (i) the individual firm and (ii) the industry;

Illustrate with a diagram and explain the long-run perfectly competitive equilibrium for the firm

Question 6:

Suppose you own a coffee shop. List some of the fixed inputs and variable inputs you would use in operating the shop.

 

Baubles and Beads manufacturing produces 100 hammers per day. The total fixed cost for the plant is RM4000 per day and the total variable cost is RM13,000 per day. Calculate the average fixed cost, average variable cost, average total cost and total cost at the current output level. 

 

(c) Explain conditions under which labour might be treated as a variable cost and conditions under which it would be treated as a fixed cost. 

Question 7:

The following diagrams illustrate an industry under oligopoly consisting of 10 equal-sized firms and a particular firm in that industry. Each of the firms produces an identical product. 

(a) Assuming that the firms form a cartel, what price will the cartel choose if it wishes to maximise overall profits for the cartel?

 

(b) What total output must the cartel produce in order to maintain this price ?

(c) To what output will an individual firm be restricted if this price is to be maintained (assume all firms are permitted to produce the same level of output)?

(d) If the other firms stick to this output, how much would an individual firm be tempted to produce if it wished to maximise its own profit at the agreed price?

(e) If it undercut the cartel price, what price and output would maximise its profit (assuming that the other members did not retaliate?

 

 

 

Note: Answer should be specific and to the point.

Reference no: EM13146542

Questions Cloud

Explain what is the molecular formula of the compound : What is the molecular formula of the compound 2,3-dimethyl-4-cyclopentyl-5-ethyldecane?
Is there evidence that dual degree students are receiving : Using a level of significance of .10, is there evidence that the dual degree students are receiving lower grades? Fully explain your answer.
Problem of cheap labor industies : Discuss the problem of cheap labor industies in Asia And suggest ways to tackle it 3-5 reference - 800 words approximately 3 pages.
Robert adjusted basis for the land : The land has a fair market value of $88,000. What is Robert's adjusted basis for the land?
Production possibility frontier bowed outwards : What total output must the cartel produce in order to maintain this price and to what output will an individual firm be restricted if this price is to be maintained?
Conclude that annual rates of return are higher : Assume the population standard deviations are the same. At the .10 significance level, can we conclude that the annual rates of return are higher on the big board?
Calculate the amount of energy needed in calories : Calculate the amount of energy needed in calories to heat 145 g of water from 22.3 degrees celsius to 75.0 degrees celsius. (water in j/g degree celsius = 4.184, cal/ g degree celsius = 1)
Receipt of the common stock dividend : What is the basis of the Purple Corporation stock, the per share basis, and gain recognized upon receipt of the common stock dividend?
Imagine you are a newly-hired paralegal working : Imagine you are a newly-hired paralegal working for an attorney in a sole practice. Similar to the paralegal discussed in the eBook, your attorney relies on you to manage the "technology" of the office. Based on your Web research and what you ..

Reviews

Write a Review

 

Microeconomics Questions & Answers

  Application of price elasticity of demand

The Haas Corporation's executive vice president circulates the memo to the firm's top management in which he argues for reduction in price of firms product. He says such a price cut will raise the firms sales and profits.

  How much would competitive firm produce

How much would this competitive firm produce and sell when the price of the good is $3 and what would be the total profit (total revenues minus total cost) made by the firm if the price of the good is $3?

  Evaluate price elasticity of demand

Evaluate price elasticity of demand

  Describe degree of operating leverage

Southcoast Oil's fixed costs are $2,500,000 and its debt repayment requirements are $1,000,000. Selling price per barrel of oil is $18 and variable costs per barrel are $10.

  Determine equilibrium price and quantity

The long run supply curve for a particular type of kitchen knife is horizontal line at a price of dolla three per knife. The demand curve for such a kitchen knife is

  What is the profit maximizing level of output

Write the expression for this firm's Total Revenue and write the expression for this firm's marginal revenue - what is the profit maximizing (or loss minimizing) level of output

  Input factors of production for long run cost

Discuss why a firm's long-run costs are minimized when it employs the mix of resources such that the ratio of all of the resources' marginal products to their wage rates are equalized. Employ a graph to illustrate.

  Explain the market equilibrating process

Describe the market equilibrating process and compare the demand for food with demand for Starbuck's coffee. Include academic research to support your ideas.

  Derive the foc and soc conditions of profit maximization

Derive the FOC and SOC conditions of profit maximization for this firm. Show that SOC is satisfied (impose necessary conditions). Which plant will have a greater increase in output? Please explain why.

  Determine the profit maximizing quantity

Choose an existing good or service from Will Bury's Price Elasticity, Incremental expenses, or Thomas Money Service Corporation scenarios, or choose an existing business with which you are familiar.

  Conduct an analysis of demand for organization product

Conduct an analysis of the demand for the organization product and or services by - Discussing the source of your numerical price and other data.

  Economies and diseconomies of scale

Describe the factors that may cause economies and diseconomies of scale. Give an example of each. Describe the economic concept of the law of diminishing marginal returns. Please give an example. Why is this important?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd