Micro-economics questions

[lalala]

I was just wondering if anyone could help me with the following questions. I'm having trouble with this subject and your help would be greatly appreciated.

1)   A competitive firm is currently producing a level of output where marginal revenue =$10 and marginal cost=$6. Is this firm maximizing profit? Explain.

2)   An ice-cream shop near a beach resort is approaching summer and needs to employ more staff.
a)     Explain what will happen to the marginal product of each additional worker as more staff are employed.
b)   Explain what will happen to the ice-cream shop’s marginal costs.

3)   a) Use a diagram to explain how a monopolist determines price and output?
        b) Use a separate diagram to explain and identify the price, output and welfare (deadweight loss) effects of monopoly compared with perfect competition.

4)   Describe the relationships between consumer surplus, the willingness of the buyer to pay and the demand curve.

5)   Why would the government impose price ceilings and floors knowing that they cause market distortions? In your answer give examples of the types of markets where governments might impose price floors and ceilings.

[TrueTears]

1. No since and then an infinitesimal increase in quantity will produce more revenue cost so profit can be further maximised. Thus only when MR=MC can profit be maximised.

3. Check your textbook (if you are using McTugget *dono if that's how you spell his name*) they have good diagrams for monopolies.

4. where is the function representing the demand curve and are the limits of the quantity bought. Note that

[TrueTears]

I will do Q 2 and 5 after I finish watching my maths documentary because they are less mathematical and requires words hehe

[lalala]

Thanks heaps!!! Do you think you could attempt the other ones pleaseee....really struggling

[schmalex]

No offence but these questions seem really basic. Maybe you should go over your course material again (rewatch lectures etc.), because you've clearly missed a lot and us telling you the answers probably won't help if you're that behind.

[TrueTears]

wait sorry for q 4 i made a mistake it should be where c is the price bought (assuming no price discrimination)

[lalala]

No offence but these questions seem really basic. Maybe you should go over your course material again (rewatch lectures etc.), because you've clearly missed a lot and us telling you the answers probably won't help if you're that behind.

Yea im really behind

[schmalex]

It's probably best if you go over lecture materials and any hand-outs you've been given, and then ask about anything that really confuses you. These questions are really general, and are probably covered much more thoroughly than what we can explain in your textbook\lecture materials.

[taiga]

Can anyone help me out this with this question ;
Many small countries have no comparative advantage in anything.

"True or False"

I'm finding it difficult to grasp the concept of it because as I understand it, having a shocking economy where it takes a lot of item A to produce little of item B (hence not much of B is lost in producing A) can give you a comparative advantage. I'm not sure how to tie this into "many small countries" in the sense that I'm pretty short on examples.

Anyone mind helping me out?

[Fyrefly]

False.

America has huge economy. Thus, they have absolute advantage. However, it turns out that Americans are shithouse at making pencils.

New Zealand has a small economy. However, it turns out that New Zealanders are very efficient at making pencils. So even though they don't have an absolute advantage like America does, they have a comparative advantage when it comes to producing pencils.


Edit: Don't ask me for a more detailed explanation please, I don't remember that much about economics... just the basics. Maybe someone else with more economics awesomeness can give a better explanation, if you need it.

[schmalex]

The reason it is false is because even if you have no ABSOLUTE advantage you will ALWAYS have a COMPARATIVE advantage because a comparative advantage only means that your opportunity cost is lower, not that you can actually produce something more efficiently. You don't actually need an example, you just need to explain what comparative advantage is and why it always exists.

[Fyrefly]

Can anyone help me out this with this question ;
Many small countries have no comparative advantage in anything.

"True or False"

I'm finding it difficult to grasp the concept of it because as I understand it, having a shocking economy where it takes a lot of item A to produce little of item B (hence not much of B is lost in producing A) can give you a comparative advantage. I'm not sure how to tie this into "many small countries" in the sense that I'm pretty short on examples.

Anyone mind helping me out?

Comparative advantage is a good thing, if utilised... perhaps revisit that concept: http://en.wikipedia.org/wiki/Comparative_advantage

I remember an example... I'll try and explain it:

Bob is a doctor. His secretary's name is Jane. Dr. Bob can type 10 pages per hour, and gets paid $120/hr. Jane can only type 7 pages per hour, but only gets paid $22/hr. Even though Dr. Bob can type faster than Jane, it is more efficient to get Jane to type instead - Jane costs $3.15 per page, while Dr. Bob costs $12 a page. So Jane has a comparative advantage when it comes to typing, and Dr. Bob is best off keeping himself busy with doctor stuff and paying Jane to type.

If this were applied the international trade economics example I gave before:

Jane is NZ
Bob is America
Pages are Pencils
Wage rate are Inputs (Lead, Wood, Labour... whatever else you use to make pencils)