Reference no: EM132992589

Microeconomics Assignment

Question 1
Using a production possibilities frontier (PPF) diagram, determine how does a country's PPF change in response to the events described below.

Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing.

a) Reducing import taxes (tariffs) on primary inputs
b) Increasing the expenditure on research and development
c) The introduction of greater flexibility in labour markets (new government laws enabling easier hiring of workers)
d) Increasing skilled migration into a country
e) The discovery of new mineral deposits in a country

Question 2
For each of the events describe below, you are required to explain:
1. The market you are evaluating (e.g., labour market, automotive market, etc).
2. Does the event act on the demand side, supply side, or both sides of the market?
3. Does the event lead to a quantity or price change? Or does the event lead to a shift in demand, supply, or both?
Make sure to explain what sort of assumptions you are making on the elasticities of demand and supply (when plotting your demand and supply, describe whether you are assuming an elastic or inelastic demand/supply).
a) The implementation of a "maximum rent" program in the housing rental market

b) The implementation of a minimum wage

c) The implementation of subsidies to agriculture production in Australia

d) The implementation of a Carbon tax in the economy. A Carbon tax is charged according to the level of emissions of greenhouse gases in an economy.
e) The implementation of a new loan program to university students in the education sector

Question 3
The Pear company sells a smart phone for $350. Its sales have averaged 9,000 units per month over the last year. Recently, its closest competitor Banana company reduced the price of its smart phone from $450 to $300. As a result, Pear's sales declined by 1,500 units per month.
(a) What is the cross price elasticity of demand between the Pear and Banana smart phone? Use the averaging formula. What does this indicate about the relationship between the two products?
(b) If the Pear company knows that the price elasticity of demand for its phone is -1.5, what price would the Pear company have to charge to sell the same number of units as it did before the Banana company price cut?
Assume that Banana company holds its price of its phone constant at $300. Use the averaging formula.

Question 4
The diagram below illustrates a monopoly firm:
(a) Label the curves Curve I, Curve II, Curve III, Curve IV.
(b) Graphically identify profit maximizing output and price
(c) Explain how the amount of profit is defined at the maximum-profit output.

Question 5
Using the following table
a) construct the cost schedule for a firm operating in the short run

b) Graph the average variable cost, average total cost and marginal cost curves.

Attachment:- Micro Economics_Assignment.rar