Ask Question, Ask an Expert


Ask Microeconomics Expert

problem 1: If demand is represented by Qd = 50 -.5P +.005I where I is income and I = $50,000 and supply is represented by Qs = 100 +.4P - 2W where W is wages and W = $15.00.
a) Compute the equilibrium price and quantity where wages = W = $15.00.
b) Compute the equilibrium price and quantity if income falls to I = $40,000?
c) Plot the demand and supply for the two income level. In the graph, mark all values that fully identify the curve.

problem 2: Suppose an investment can yield three possible cash flows with their probabilities given in the parentheses:

$600(p = 0.5); $-100 (p = 0.2) and $800 (p = 0.3).

a) Compute the expected value and the standard deviation of this investment. Is this investment risky? Why?

b) The equation E(x) = 359 + 0.5SD describes the indifference curve of this investor. Is this investor risk averse, risk neutral, or risk loving? describe your answer and draw the curve.

c) How much would this person pay for the investment opportunity (certainty equivalent of the current investment)? How much is risk premium for the current investment?

problem 3: Patrick consumes only two goods: Celtic Music concerts and Celtic Springs Water. Patrick earns $100 per month at his part-time job in the library. The price of Celtic concerts is $10. The price of Celtic Springs Water is $2. Patrick currently goes to 5 Celtic concerts and consumes 25 bottles of Celtic Spring Water in a month.

a) Draw Patrick's budget constraint and optimal consumption bundle. Please put Celtic concerts on the x-axis.

b) In April Patrick receives a 5% pay increase. Meanwhile the inflation raises the price of concerts to $10.50 and the price of Celtic Springs Water to $2.10. Draw Patrick's new budget constraint and optimal consumption bundle. Please put Celtic concerts on the x-axis. How many Celtic concerts does he attend in April? How many bottles of water does he drink in April?

problem 4: The demand equation for crossing the G.W.Bridge in New York City is P = 50-0.0001Q where P is the toll at the bridge and Q is the number of vehicles that cross the bridge every day.

a) Compute the toll that would maximize revenue for the state of New York. At this toll, how many cars would cross the bridge?

b) What is the price elasticity at this toll? describe your answer.

c) Also illustrate this price/quantity combination in a graph with demand curve and marginal revenue curve.

d) Suppose the company in charge of the maintenance of the bridge successfully negotiates a 20% increase in its annual fee. The State of New York hires you to advise them how to cover this cost. Would you advise them to raise the toll you computed in part a)? (Yes, or No, describe your answer). Would you advise them to raise revenue some other way? describe your answer.

problem 5: England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour.

a) Which country has the absolute advantage in the production of each good? Which country has the comparative advantage?

b) If England and Scotland decide to trade, which commodity will Scotland trade to England? describe.

c) If a Scottish worker could produce only 1 sweater per hour, would Scotland still gain from trade? Would England still gain from trade?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91826

Have any Question? 

Related Questions in Microeconomics

Microeconomicswatch this 30 mins youtube link on how the

Microeconomics Watch this 30 mins. YouTube link on 'How The Economic Machine Works' You will enjoy it! Write down your understanding of 'How The Economic Machine Works' and make sure to suppo ...

Assignmentfirms use inputs workers machinery natural

Assignment Firms use inputs (workers, machinery, natural resources) to produce outputs (goods and services). For example: General Motors uses steel, rubber and other materials to create automobiles. A pizza restaurant tu ...

Leasing equipmentfor catherine owens onlybullsuggest one

Leasing Equipment For Catherine Owens Only • Suggest one key economic factor that motivates leasing as an option in acquiring an asset. Explain the potential asymmetries that may exist where leasing may be beneficial to ...

Assignmentanalyze the significant rules concerning the

Assignment Analyze the significant rules concerning the manner in which corporations treat the dividends that they are paying. Based on your analysis, recommend at least two changes that you would make to the rules that ...

The economy is full employment now the government wants to

The economy is full employment. Now the government wants to change the composition of demand toward investment and away from consumption without, however, allowing aggregate demand to beyond full employment. What is requ ...

Assignmentthe agile approach towards system analysis and

Assignment The agile approach towards system analysis and development emphasizes iterative and incremental development, in which requirements and solutions evolve through collaboration. Prepare a 1000 word essay on the r ...

1 the crr model european claimconsider the crr model of

1. The CRR model: European claim. Consider the CRR model of stock price S with T periods and parameters d (a) Consider the European claim X with expiry date T and the payoff X = g(S r ) = 1/S T 1[k,∞)(S T ). Show that th ...

Assignmentreview the cba provided in the resources section

Assignment Review the CBA provided in the resources section between the Trustees of Columbia University and Local 2110 International Union of Technical, Office, and Professional Workers. Describe how this is similar to a ...

Suppose the economy was at equilibrium before the start of

Suppose the economy was at equilibrium before the start of the recession. Show this using the IS-LM, Keynesian cross, AD-SRAS-LRAS and money market spaces. Following the start of the recession, what happened to aggregate ...

Economic choice and economic decision makingconsider your

ECONOMIC CHOICE AND ECONOMIC DECISION MAKING Consider your last vehicle purchase and the decision making process you engaged in while deciding what vehicle to purchase or if a new vehicle was the right decision. While an ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen