ADMAS UNIVERSITY COLLEGE

FACULTY OF DEVELOPMENT STUDIES

MICRO ECONOMICS
GROUP MEMBERS:
NAME

ID

Lecturer: Zakariye
Course: Microeconomics
Date: 19/11/2014

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Q1: Because bagels and cream cheese are often eaten together , they are complements
a) We observe that both the equilibrium price of cream cheese and equilibrium quantity
of bagels have risen what could be responsible for this pattern a fall in the price of
flour or a fall in the price of milk? Illustrate and explain your answer

o The responsibility of this price is the fail of the price flour

b) Suppose instead that the equilibrium price of cream cheese has risen but the
equilibrium quantity of bagels has fallen. What could be responsible for this pattern a
rise in the price of flour or a rise in the price of milk? Illustrate and explain your
answer

The quantity of demand of bagels is raised, because the price of the flour is fallen.
the other side cream cheese price is risen, because the demand of cream cheese
increase so that increasing of demand bring to raise the price of cream cheese
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Q2: Suppose that the price of basketball tickets at your collage is determined by market
Price
4
8
12
16
20

Quantity
demand
10000
8000
6000
4000
2000

Quantity
supply
8000
8000
8000
8000
8000

forces, currently, the demand and

supply schedules are as follows:

a) Draw the demand and supply curve. What is unusual about this supply curve? Why might
this be true?

The curve is unusual curve because the supply curve is constant

b) What are equilibrium price and quantity of tickets?
The equilibrium price is between 8 and 12 and the equilibrium quantity is 8000
c) Your collage plans to increase total enrollment next year by 5000 student, the additional
student will have the following demand schedule
Price
Quantity demand
4
4000
8
3000
12
2000
16
1000
20
0
Now add the old demand schedule and demand schedule for new student to calculate the
new demand schedule for entire collage what will be the new equilibrium price and
quantity?

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Q3: The market for pizza has the following demand and supply schedules
Price
Quantity demand
Quantity supply
4
135
26
5
104
53
6
81
81
7
68
98
8
53
110
9
39
121
Graph the demand and supply curves what is the equilibrium price and quantity in this
market? If the actual price in this market were above the equilibrium price, what would
drive the market toward the equilibrium? If actual price in this market were below the
equilibrium price, what would drive the market toward the equilibrium?

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 The curve indicate us (equilibrium point 1) is when the market price above the
equilibrium price, (equilibrium point 2) also shows us when the market price
below the equilibrium price.
Q4: Suppose that business travelers and vacationers have the following demand for
airline tickets from Hargeisa to Berbera
a) As the price of tickets rises from $200 to $250, what is the price elasticity of demand
for
I.
business travelers and
II.
vacationers?
b) Why might vacationers have a different elasticity than business travels?
Price
Quantity demanded
Quantity demanded
( business travel)
( vacationers)
$150
2100
1000
200
2000
800
250
1900
600
300
1800
400

vacationers have a different elasticity than business travels because business

travels are inferior good is elastic demand, while vacationers are luxury or normal
and have elastic demand.
Q5: Nimbus INC, makes brooms and then sells them door to- door, here is the
relationship between the number of workers and Nimbus is output is a given day:
Workers
Output
MP
TC
ATC
MC
0
0
0
1
20
20
2
50
80
3
90
40
4
120
30
5
140
20
6
150
10
7
155
5
a) Fill in the column of marginal products. What pattern do you see? How might you
explain it?
Marginal product, when 5 labor is employed MP became negative
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b) A worker costs $100 a day, and the firm has fixed costs of $200, use this information
to fill in the column for total cost.
Marginal product increasing until reaches equilibrium and then decrease while
marginal cost is fixed.
c) Fill in the column for average total cost, (recall that ATC=TC/Q) what pattern do you
see?
Average total cost and marginal cost both are fixed
d) Now fill in the column for marginal product and the column for marginal cost.
Explain the relationship.
The relationship between marginal product and marginal cost is whenever the
amount of marginal cost decrease at the sometimes it effected to decline the
marginal product and their relationship.
e) Compare the column for average total costs and the column for marginal cost.
Explain the relationship.
The relation between average total cost and marginal cost is direct proportional.

Q6: Healthy hurry is justice Bar has the following cost schedules:
Quantity
Variable cost
Total cost
0
$0
$30
1
10
40
2
25
55
3
45
75
4
70
100
5
100
130
6
135
165
a) Calculate average variable cost, average total cost, and marginal cost for each
quantity. Graph all three curves.
b) What is the relationship between marginal cost curve and the average total cost
curve? Between the marginal cost curve and the average variable cost curve?
Explain?

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Q7: Consider the following table of long- run total cost for three different firms
QUANTITY
1
2
3
4
5
6
7
FIRM A $60
$70
$80
$90
$100
$110
$120
FIRM B 11
24
39
56
75
96
119
FIRM C 21
34
49
66
85
106
129
Does each of these firms experience economics of scale or diseconomies of scale?
Suppose that firms has only one variable input, labor and firm output is zero, one
the labor is zero one firm have only eight workers.
a) Firm A only b) firm B only c) firm C only
Yes these are experiences the economics of scale the firm C
economics of scale
Q8: Assume that the gold mining industry is competitive
a) Illustrate a long run equilibrium using diagrams for the gold market and for a
representative gold mine.
b) Suppose that an increase in jewelry demand induces a surge in the demand for a gold,
using your diagrams show what happens in the short-run to the gold market and to
each existing gold mine.
c) If the demand for gold remains high what would happen to the price over time?
Specifically, would the new long-run equilibrium price in part( b)? is it possible for
the new long-run equilibrium price to be above the original long-run equilibrium
price? Explain.
A) j

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 B)

If jewelry demand increase its induces surge in the demand for the
gold average cost becomes less them the price and firm earns
economics in the short run

C)

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If the demand for gold remains high price also remain high the new
long-run equals short-run equilibrium price in the part( b)
Q9: Give an example of a government created monopoly. Is creating this monopoly
necessarily bad public policy? Explain?
Government creates monopoly market
Government may be restricting by giving a single firm the exclusive right to sell a
particular good in the certain markets.
Potent and copyright low and two important examples of how the government creates to
save the public interest for example Total Company

Q10: Define natural monopoly; what does the size of a market have to do with whether
an industry is a natural monopoly?
An industry is natural monopoly when the single firm can supply a good or
service to an entire market at similar cost then to are more firms ( a natural
monopoly a rises when there are economics of scale over the relevant of output.
Q11: Draw the demand, marginal-revenue and marginal- cost curves for a monopolist,
show the profit- maximizing level of output, show the profit maximum price?

a) Demand and marginal revenue curve of monopoly

b) Marginal cost pricing for natural monopoly price

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c) Profit maximizing for monopoly

Q12: In your diagram from the previous question, show the level of output that
maximizes total surplus. Show the dead weight loss from the monopoly. Explain your
answer?
The efficiency monopoly

Monopolist produces less then socially efficiency quantity of output

Dead weight loss caused by the a monopoly is similar to dead weight loss caused
by TAX
The difference between two cases is the government gets the monopoly profit
revenue from the TAX, whereas a private firm gets the monopoly profit.
Q13: If a group of sellers could form a cartel, what quantity and price would they try to
set?
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 A group of salaries could form a cartel they like to set the same price quantity of
monopoly the collude how to get profit like monopoly to became (price market)
Q14: Compare the quantity and price of an oligopoly to those of a monopoly, Give two
examples other than oligopoly to show how the prisoners dilemma helps to explain
behavior?
According to quantity oligopoly quantity is more than because oligopoly market
there are vies firms in the market according to the price monopoly is more than
oligopoly because monopoly is only one firm in the market and its price maker.

Q15: Complete the table below by filling in YES, NO or MAYBE for each type of
market structure?
Firms
More differentiated
product
How excess capacity
Advertise
Pick Q so that MR=MC
Pick Q so that P=MC
Earn economic profit in
the long-run equilibrium
Facedown word sloping
demand curve
Have MR less then price
Face the another firm
Exit in long-run if the
profit are less than zero

Product
competition
NO

Monopoly
competition
YES

Monopoly

NO
NO
YES
YES
NO

YES
YES
YES
NO
MAY BE

YES
MAY BE
YES
NO
YES

NO

YES

YES

NO
YES
NO

NO
YES
NO

YES
NO
YES

NO

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