Question 1:

Calculate Opportunity Costs. Are the costs constant or increasing?

Good A Good B
50 0
30 30
10 60

Question 2:

Calculate Opportunity Costs. Are the costs constant or increasing?

Good A Good B
150 0
100 250
0 500

Question 3:

Given the following table, answer the questions:

Elizabeth Brian

Bread Apple Bread Apple

50 0 30 0

25 20 15 10

0 40 0 20

a) Calculate opportunity costs for Elizabeth and Brian.

b) Who produces apples and who produces bread?
c) Given that Terms of Trade is 20 breads and 30 apples. Should they trade? (draw box and
show).

Question 4:

A government is planning to set a Price ceiling (Maximum price a producer can set).

a) What is the consumer surplus and producer surplus at Equilibrium price?

b) The government set a Price ceiling at $30 (in the diagram below).
i) What is the change in consumer surplus because of the price ceiling?

ii) What is the change in producer surplus because of the price ceiling?

iii) Who, the producer or the consumer, is benefitted from this government regulation?

Question 5:

Consider the market for cars. Petrol prices have gone up while steel prices have gone down. What has
happened to the demand and supply of cars during the time? What happened to the price charged and
quantity of cars in the market?

Question 6:

During the Covid Pandemic, sanitizers became an essential product, with domestic producers entering
the market where previously, sanitizers were mostly imported. What has happened to the demand and
supply of sanitizers during the time? Assuming that demand has shifted more than supply, what
happened to the price charged and quantity of sanitizers in the market?

Question 7:

Due to the recent dollar hike, garments owners are facing higher imported prices on textiles have gone
up. Furthermore, given the huge employee cuts worldwide, income of consumers abroad for our
garments products will go down. What has happened to the demand and supply of garments during the
time? Assuming that demand has shifted less than supply, what happened to the price charged and
quantity of garments in the market?
MIDTERM 2

Question 1:

Calculate the elasticity from point A to point B. Calculate the total revenues at point A and point B.

Question 2:

If price of Good B goes up from $100 to $120, as a result, quantity demanded of Good A goes down from
50 units to 30 units, what is Ec? Are the goods substitutes or complements?

Question 3:

If Mary’s income decreases from $5000 to $4000 as a result, quantity demanded of Good A goes UP
from 50 units to 100 units, what is Ey? Is the good normal, inferior or neutral?

Question 4:

1.
Snacks (price = $4) Drinks (price = $2)
Quantity Total Utility (utils) Quantity Total utility (utils)
1 15 1 12
2 25 2 21
3 31 3 29
4 34 4 36
5 36 5 42
6 47
7 50
8 52
Assume that you have $20
 a) Determine the marginal utility and marginal utility per dollar spent on the fourth
drink.
b) What is the optimal consumption rule?
c) How many drinks and snacks should you purchase to maximize your total utility.
What will be your maximum total utility from snacks and drinks?

Question 5:

Fixed Variable Quantity Marginal Total Average Total Average Total Average Marginal
Input Input, of Output Physical Fixed Fixed Variable Variable Costs Total Cost Cost
(Capital Labour (Units) Product Costs Costs costs Costs
Units) (workers)
Formula: Formula: Formula Formula Formula Formula

1 1 20 50 30
1 2 35 50 60
1 3 55 50 90
1 4 80 50 120
1 5 100 50 150

Given the following, complete the box and show calculations. Also draw the following graphs based on
the numbers calculated:

a. Marginal Physical Product

b. Marginal Cost

Question 6:

Suppose an engineer leaves his job at a company to open his own consulting firm. As an
engineer, he earned $100,000 a year. To run his consulting firm, he needs to pay a total of
$60,000 in form of salary to junior consultants, office premises and utilities. His total revenue is
$125,000. Calculate:
a) Accounting profit
b) Economic profit
c) Should he shut down his consulting firm?
Final

Question 1:

The following table shows information on equilibrium price and different costs at the profit
maximizing/loss minimizing point for a perfect competitive firm.

Equilibrium Price $12

Quantity of output produced 100units
Total Revenue
Average total cost per unit $15
Total Cost
Average variable cost $10
Total Fixed cost
Profit/Loss

(a) Calculate and fill in the missing information of the table. Is the perfect competitive firm incurring a
loss or a profit? Based on your calculation state whether the firm should continue in the market or leave
the market? Show your calculations.

(b) Based on your calculation, draw the appropriate diagram with the ATC, MC, AVC, MR and demand
curves to represent the above scenario

Question 2:

1. Use the diagram below to answer the questions

a) What is the monopolist’s profit maximizing output?

b) Calculate the monopolist's total revenue
c) Calculate the monopolist’s total cost
d) Calculate the monopolist’s profit
e) Calculate the producer’s surplus
f) Calculate the consumer surplus
g) Calculate the deadweight loss
h) Calculate the producer surplus if there is perfect price discrimination
i) Calculate the Consumer surplus if there is perfect price discrimination
j) Calculate the Dead weight loss if there is perfect price discrimination