Micro Economics
Include 3 Micro Economics question. all questions are in the Attached file.

Following is the questions pasted into the web which include

some errors because the website doesn’t support the exponent.

1. Assume that utility function is given by

U(X,Y) = X1/3 Y1/2

(a) Obtain the Marshallian demand functions for goods X and Y.

(b) Compute the indirect utility function and the expenditure function for this

case.

(c) Use the expenditure function calculated in part (b) together with Shephard’s lemma to compute the compensated demand function for good X.

(d) Describe how the compensated demand curve for X is shifted by changes in income or by changes in the price ofthe other good.

(e) Use the results from part (c) together with the uncompensated demand function for good Xto show that the Slutsky equation holds for this case.
2. The output of a farm is related to the inputs, labour and capital, by the function

0 = 100 L10 K1/4

where L and K are labour and capital. Find

(a) The cost-minimising input levels for an output level 0 ifthe rental on capital is r and the wage

IS w.

(b) The long-run cost function.

(c) The effect of an increase in O on long run marginal cost.

(d) The demand for labour as a

function ofw, the level of capital inputs and the price of output, p (i.e., the short-run demand curve for labour).
(e) The demand for

labour and capital as functions ofthe factor prices, w and r, and the price of output, p (i.e., the long run factor demand equations).
3. (a) Consider a Cournot model with two firms. The market inverse demand function is given by

P = 120 – O

where O = q1 + q2

and qi

is the quantity produced by firm i. Each firm’s total cost is quadratic, given by

C1 = q12 and

C2 = q22, respectively.

Determine the

Cournot-Nash equilibrium, and compute the associated profits.

(b) Now suppose that the two firms in the duopoly are permitted to explicitly

collude by forming binding agreements with one another. The market inverse demand function is given by
P = 120 – O

where O = q1q2

and qi is the quantity produced by firm i. Each firm’s total cost is quadratic, given by

C1 = q12 and

C2 = q22, respectively.

Finally,Assume that the firms have equal bargaining power.

Determine the quantities which the firms would agree upon, and compute the associated

profits.

micro economics

Order Description

Assignment Questions (Semester 2, 2015)
Business Microeconomics – Worth 20% of total assessment:
Answer all five (5) of the following questions. Each question is worth 10 marks.
Question 1:
(a) Sketch the following curves and provide an explanation for their shape
(i) the marginal cost curve (1mark)
(ii) the average cost curve (1mark)
(iii) the average fixed cost curve (1 mark)
(iv) the average variable cost curve (1 mark)
(b) Why does the marginal cost curve intersect the average cost curve at its minimum point?
(3 marks)
(c) Why does the minimum point of the AVC curve occur at a lower level of output than the
minimum point the AC curve? (3 marks).
Question 2
Medicines are often cited as examples of goods which are very price inelastic.
(a) Explain why this might be the case. (4 marks)
(b) Draw a demand curve illustrating price inelastic demand and explain how the
curve relates to the definition of price elasticity of demand. (4 marks)
(c) Use the diagram to explain how inelastic demand has implications for
pharmaceutical company price setting and revenue. (2 marks)
Question 3
(a) 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’. (2 marks)
(b) Illustrate with a diagram and explain the short-run and long run perfectively competitive
equilibrium. (3 marks)
(c) Illustrate with a diagram and explain the short run and long-run monopolistic competitive
equilibrium. ( 3 marks)
(d) Why are firms in the perfectly competitive market structure regarded as more efficient?
( 2 marks)
Question 4
“A monopolist will charge the highest price the market will bear” Discuss if this statement is
true or false with the aid of diagrams. (7 marks for explanation, 3 marks for diagram).
Question 5
Petrol prices recently plummeted; discuss some of the reasons behind
this development.
(10 marks)

micro economics

Order Description

Assignment Questions (Semester 2, 2015)
Business Microeconomics – Worth 20% of total assessment:
Answer all five (5) of the following questions. Each question is worth 10 marks.
Question 1:
(a) Sketch the following curves and provide an explanation for their shape
(i) the marginal cost curve (1mark)
(ii) the average cost curve (1mark)
(iii) the average fixed cost curve (1 mark)
(iv) the average variable cost curve (1 mark)
(b) Why does the marginal cost curve intersect the average cost curve at its minimum point?
(3 marks)
(c) Why does the minimum point of the AVC curve occur at a lower level of output than the
minimum point the AC curve? (3 marks).
Question 2
Medicines are often cited as examples of goods which are very price inelastic.
(a) Explain why this might be the case. (4 marks)
(b) Draw a demand curve illustrating price inelastic demand and explain how the
curve relates to the definition of price elasticity of demand. (4 marks)
(c) Use the diagram to explain how inelastic demand has implications for
pharmaceutical company price setting and revenue. (2 marks)
Question 3
(a) 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’. (2 marks)
(b) Illustrate with a diagram and explain the short-run and long run perfectively competitive
equilibrium. (3 marks)
(c) Illustrate with a diagram and explain the short run and long-run monopolistic competitive
equilibrium. ( 3 marks)
(d) Why are firms in the perfectly competitive market structure regarded as more efficient?
( 2 marks)
Question 4
“A monopolist will charge the highest price the market will bear” Discuss if this statement is
true or false with the aid of diagrams. (7 marks for explanation, 3 marks for diagram).
Question 5
Petrol prices recently plummeted; discuss some of the reasons behind
this development.
(10 marks)