Microeconomics Mock Q's 1-3
FHNW IM
FHNW IM
Fichier Détails
| Cartes-fiches | 86 |
|---|---|
| Langue | English |
| Catégorie | Gestion d'entreprise |
| Niveau | Université |
| Crée / Actualisé | 29.06.2021 / 22.06.2024 |
| Lien de web |
https://card2brain.ch/box/20210629_microeconomics_mock_qs_13
|
| Intégrer |
<iframe src="https://card2brain.ch/box/20210629_microeconomics_mock_qs_13/embed" width="780" height="150" scrolling="no" frameborder="0"></iframe>
|
In the local market for waterproof jackets, the aggregate demand curve is given by the equation
Qdjacket = 200 – 0.5Pjacket
Qdjacket : quantity of waterproof jackets demanded (per month)
Pjacket : unit price of a waterproof jacket
Draw the inverse demand function (= demand curve) in the diagram below. Clearlyindicate the numerical values of the points where the inverse demand functionintersects with the x- and the y-axis.
In the local market for waterproof jackets, the aggregate demand curve is given bythe equation
Qdjacket = 200 – 0.5Pjacket
Qdjacket : quantity of waterproof jackets demanded (per month)
Pjacket : unit price of a waterproof jacket
If the unit price is 300, how big is the quantity demanded?
50
In the local market for waterproof jackets, the aggregate demand curve is given bythe equation
Qdjacket = 200 – 0.5Pjacket
Qdjacket : quantity of waterproof jackets demanded (per month)
Pjacket : unit price of a waterproof jacket
Calculate the consumer surplus for a unit price of 300.
(50 × 100) / 2 = 2500
In the local market for waterproof jackets, the aggregate demand curve is given bythe equation
Qdjacket = 200 – 0.5Pjacket
Qdjacket : quantity of waterproof jackets demanded (per month)
Pjacket : unit price of a waterproof jacket
Explicate the term “consumer surplus
Consumer surplus refers to the difference a consumer is willing to pay for a goodand the actual amount he or she actually has to pay when buying it.
For any particular good, an increase in the price of a complement would most likelyresult in?
Statement I: If close substitutes are easily available for a particular good, the priceelasticity of demand for that good cannot be identified.
Statement II: If a relatively large proportion of a person’s income is spent on aparticular good, the price elasticity of demand for that good is most likelyrelatively high.
Which of the following is true?
Statement I: If the price elasticity of demand for a good equals -1.25, an increase inprice will result in a decrease in total revenue.
Statement II: If a decrease in price leads to a decrease in total revenue, demand forthe good is price elastic.
When a rent ceiling (maximum price) is imposed below the equilibrium marketprice, which of the following is most likely?
Which of the following is least likely regarding indifference curves?
Robert’s MRSxy is given by 2.5. If Good Y is on the y axis and Good X is on the x axis,the slope of the indifference curve is closest to?
This question addresses the budget constraint: The amount of Good A that aconsumer would have to give up in order to consume 1 more unit of Good B is givenby:
The following diagram illustrates a consumer’s optimal combination of good Aand good B (given her preferences as illustrated by the indifference curve) andthe budget constraint BEFORE AND AFTER a given price REDUCTION of good A.
A)Show and identify in the above diagram the so-called substitution effect.
b)Show and identify in the above diagram the so-called income effect.
c)Is good A and inferior, Giffen, or normal good? Substantiate your answer.
d)The change in the quantity consumed of good A is partly due to the substitutioneffect and the income effect. Explain what these two effects mean.
C) It is a normal good. The price reduction leads to both a positive substitution effectand a positive income effect.
d) substitution effect: The change in the amount of a good that would be consumed as the price of that good changes, holding constant all other prices and the level of utility. It is measured on the initial indifference curve/utility level.
income effect: The change in the amount of a good that a consumer would buy as purchasing power changes, holding all prices constant.
The diagram below illustrates the situation of a firm in a perfectly competitivemarket. Assume that all fixed cost is sunk cost.
a)Explicate the meaning and the implications of the concept of
perfect competition
b)Clearly illustrate the profit maximising (loss minimising) quantity that this firmwill produce
c)Does this firm earn an economic profit? If so, indicate in the diagram theeconomic profit made by this firm. Comment your answer.
D)Explicate the meaning of and the difference between the two terms “shortrun” and “long run”.
a)Full information about prices: All market participants realize immediately if a goodis overpriced.
•Equal access to resources: All producers produce under identical conditions.
•Price taker: see above: undifferentiated products & fragmented industry.
•Law of one price: see above: undifferentiated products & fragmented industry &full information about prices.
•Free entry: this secures competition and leads to the elimination of economic profitin the long run.
c) This firm does not generate an economic profit, nor an accounting profit. This is so because marginal revenue (i.e. the unit price) only covers average variable cost. Only if the unit price lies above average total cost does a company generate an economic profit.
In the illustrated situation, however, the firm is unable to even cover fixed cost, like interest paid on borrowed capital, leasing rates etc. Therefore, as only variable costs are covered, a loss occurs, even in accounting terms.
d) Short run: The period of time in which at least one of the firm’s input quantities cannot be changed.
Long run: The period of time in which all of the firm’s input quantities can be changed, everything is variable. The long run is a projection window, in which the firm can re-decide whether it wants to produce at all, and if so, where and with how much capital.
The following diagram illustrates, for the short-run, the situation of a firm undermonopolistic competition. The barriers to entry in that market are low.
a)Name/identify the two linear functions labelled 1 and 2.
b)Indicate/Illustrate in the diagram above the produced and supplied quantity aswell as the unit price charged by the firm.
c)Illustrate in the diagram above the economic profit earned by the firm
d)The economic profit earned by the firm attracts new entries into that market.Illustrate in the diagram below the effects of that increase in competition on thedemand for the firm’s produce and comment on the consequences for the unit price,the quantity produced and sold as well as for the economic profit made by the firm.
e)Where, in the long-run, i.e. at the end of the short-run, is the demand curve likely tobe positioned? Illustrate in the diagram below the most likely position of the demandcurve at the end of the short-run.
In a monopolisitcally competitive market, a firm faces diminishing marginal revenue.
The market demand function for product A is given by the equation
QdA = 100 – 0.5PA
QdA : quantity of good A demanded
PA : unit price of good A
What is the corresponding marginal revenue function? Remember: You first have to calculate the inverse demand function
QdA = 100 – 0.5PA
0.5PA = 100 – QdA
PA = 200 – 2QdA MR = 200 – 4QdA
The market demand function for product A is given by the equation
QdA = 100 – 0.5PA
QdA : quantity of good A demanded
PA : unit price of good A
Illustrate, in the diagram below, the inverse demand function (= demand curve) and the corresponding marginal revenue function from the above question.
How does a firm in a monopolistically competitive market determine its profitmaximizing output quantity?
By setting MR = MC
QdA = 100 – 0.5PA
QdA : quantity of good A demanded
PA : unit price of good A
MR = MC
Now assume that a given firm has constant marginal cost of 20.
If that firm is faced with the demand curve from marginal cost of 20, how much will that firm produce
MR = 200 – 4QdA = 20
4QdA = 180
QdA = 45
what is the unit price that firm will charge?
MR = 200 – 4QdA = 20
4QdA = 180
QdA = 45
PA = 200 – 2QdA
Therefore
PA = 200 – 90 = 110
Draw the demand curve (i.e. the inverse demand function) in the diagram below.
If the unit price is 2, how big is the quantity demanded?
40
Calculate the consumer surplus for a unit price of 1.5 .
(50 × 2.5) / 2 = 62.5
Explicate the term “consumer surplus”.
Consumer surplus refers to the difference a consumer is willing to pay for a good and the actual amount he or she actually has to pay when buying it.
For any particular good, an decrease in the price of a complement would most likely result in?
Statement I: The availability of close substitutes for a particular good A has no effect on the price elasticity of demand for that good A.
Statement II: If a comparatively small proportion of a person’s income is spent on a particular good, the price elasticity of demand for that good is comparatively high (i.e. very elastic).
Which of the following is most likely true?
Statement I: If the price elasticity of demand for a good equals -2.5, an increase in price will result in a decrease in total revenue.
Statement II: If a decrease in price leads to an increase in total revenue, the demand for that good is price elastic.
When a price floor is imposed above the equilibrium market price, which of the following is most likely true?
Which of the following statements is most likely true??
Peter’s MRSxy is given by 1.5. If Good Y is on the y axis and Good X is on the x axis, the slope of the indifference curve is closest to?
This question addresses the budget constraint: The amount of Good A that a consumer would have to give up in order to consume one more unit of Good B is given by:
The following diagram illustrates a consumer’s optimal
combination of good A and good B
(given her preferences as illustrated by the indifference curve) and
the budget constraint BEFORE AND AFTER a given price REDUCTION of good A.
a) Show and identify in the above diagram the so-called substitution effect
b) Show and identify in the above diagram the so-called income effect.
c) Is good A an inferior, a Giffen, or a normal good? Substantiate your answer.
d) The change in the quantity consumed of good A is partly due to the substitution effect and the income effect. Explain what these two effects mean.
c) It is an inferior good. The price reduction leads to a positive substitution effect and a negative income effect. However, the positive substitution effect outweighs the negative income effect, so overall, more of the good is consumed
d)substitution effect: The change in the amount of a good that would be consumed as the price of that good changes, holding constant all other prices and the level of utility. It is measured on the initial indifference curve/utility level.
income effect: The change in the amount of a good that a consumer would buy as purchasing power changes, holding all prices constant.
The diagram below illustrates the situation of a firm in a perfectly competitive market. Assume that all fixed cost is sunk cost.
a)Name and explicate the difference between the average variable cost curve and the average total cost curve B
b) Does this firm earn an accounting, and/or an economic profit? Comment your answer.
c) Illustrate the profit maximising (loss minimising) quantity that this firm will produce.
d) Assume that this firm operates under the conditions of a perfectly competitive market. Is this firm likely to continue its operations or is it at risk of shutting down for good? Substantiate your answer
e) Explicate the meaning of and the difference between the two terms “short run” and “long run”.
a)Curve A includes the average fixed cost and therefore represents all economic cost (implicit and explicit opportunity cost) of the firm.
b)This firm does not generate an economic profit, However it might possibly earn an accounting profit. This is so because marginal revenue (i.e. the unit price) fully covers average variable cost, however, the average fixed costs are only partially covered. Chances are, that no dividend can be paid. Only if the unit price lies above average total cost does a company generate an economic profit
d)If this firm can substantially reduce variable costs then it might have a chance of survival. Operating under the conditions of perfect competition, marginal revenue is given and cannot be influenced by the firm. As it does not generate an economic profit, chances are, that, in the next long run, meaning when all cost is variable again and investment decisions can be made, this firm might not attract enough capital to keep its operations going
e)Short run: The period of time in which at least one of the firm’s input quantities cannot be changed.
Long run: The period of time in which all of the firm’s input quantities can be changed, everything is variable. The long run is a projection window, in which the firm can re-decide whether it wants to produce at all, and if so, where and with how much capital.
Your employer is a nation-wide producer of dairy products. It owns a well-known cheese brand, “Formino”. Operating under the conditions of monopolistic competition, your employer faces a downward sloping demand curve.
The market demand curve for 200g pack of “Formino” is determined by the following demand function:
QdFormino = 96000 – 8000 PFormino
QdFormino : number of 200g packs of Formino demanded per month
PFormino : unit price of one 200g pack of Formino
What is the corresponding marginal revenue function? Remember: You first have to calculate the inverse demand function first.
QdFormino = 96000 – 8000 PFormino
8000 PFormino = 96000 – QdFormino
PFormino = 12 – 0.000125 QdFormino
MR = 12 – 0.00025 QdFormino
Illustrate the demand curve and the corresponding marginal revenue function
QdFormino = 96000 – 8000 PFormino
8000 PFormino = 96000 – QdFormino
PFormino = 12 – 0.000125 QdFormino
MR = 12 – 0.00025 QdFormino
Clearly indicate and denominate the points, where the demand curve and the marginal revenue function intersect with the x-axis and the y-axis.
How does a firm in a monopolistically competitive market determine its profit maximizing output quantity?
By setting MR = MC
Now assume that a given firm has constant marginal cost of 2.
If that firm is faced with the demand curve from below, how much will that firm produce?
QdFormino = 96000 – 8000 PFormino
MR = 12 – 0.00025 QdFormino
2 = 12 – 0.00025 QdFormino
10 = 0.00025 QdFormino
QdFormino = 40000
what is the unit price that firm will charge?
MR = 12 – 0.00025 QdFormino
2 = 12 – 0.00025 QdFormino
10 = 0.00025 QdFormino
QdFormino = 40000
PFormino = 12 – 0.000125 QdFormino
Therefore
PTrice = 12 – 5 = 7
In the context if increasing tax revenue, a government decides to levy an excise tax (i.e. VAT value added tax) on suppliers. The diagram below illustrates the situation of a supplier prior to the tax (before the tax).
a) Illustrate the effects of the tax on the firm’s supply curve, and on the new equilibrium quantity and on the new equilibrium unit price.
b) Illustrate in the diagram below the dead weight loss resulting from the tax.
c) Does the price elasticity of demand have an influence on how much of the tax is paid by the supplier?
d) Illustrate in the diagram above the amount of the tax which is paid by the supplier.
c) Yes, the higher the price elasticity, the the smaller the amount of the tay which can be passed onto consumers, therefore, suppliers have to pay more of the tax.
If a monopolist faces the inverse demand function P = 50 - 5Q, which of the following statements is true?
I. The equation of the average revenue curve is AR(Q) = 50 – 5Q.
II. The marginal revenue curve is twice as steep as the average revenue curve.
III. For outputs less than 5, marginal revenue is positive, for outputs more than 5, marginal revenue is negative.
Suppose that a monopolist faced demand P = 120 - 4Q and has constant marginal cost MC = 30. If this monopolist engages in first degree price discrimination, total output will equal?
