Assignment on Microeconomics PDF

Running head: MICROECONOMICS
Microeconomics
Name of the Student
Name of the University
Course ID

MICROECONOMICS1
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................2
Answer 3..........................................................................................................................................2
Answer 4..........................................................................................................................................2
Answer 5..........................................................................................................................................2
Answer 6..........................................................................................................................................2
Answer 7..........................................................................................................................................4
Answer 8..........................................................................................................................................5
Answer 9..........................................................................................................................................6
Answer a......................................................................................................................................6
Answer b......................................................................................................................................7
Answer 10........................................................................................................................................8
References......................................................................................................................................10

MICROECONOMICS2
Answer 1
B. 1
Answer 2
B. 3
Answer 3
C. your implicit costs are $1,000 per month
Answer 4
B. $34,000; -$1,000
Answer 5
Price ceiling is defined as the legal maximum price set by government. Any price above
this maximum price is considered as illegal. Given the figure, the demand and supply curve
intersect corresponding to the price level of $35. Now the government imposes a price ceiling of
$40. As the ceiling price is above the equilibrium price the imposed price ceiling would not have
any impact on market supply and market demand (Baumol & Blinder, 2015). In this market, any
buyers who are willing to pay up to $35 would get the good. Any suppliers who are willing to
supply the good at $35 would get paid in the market. The price ceiling thus does not have any
effect in the given market. This kind of price ceiling is called non-binding or non-effective price
ceiling.
Answer 6

MICROECONOMICS3
Price floor is legal minimum price set by the government. A biding price floor is one
where government set the legal minimum price above the equilibrium price. With the higher
legal minimum price producers receive a higher price which increases the income of the
producers (Sloman & Jones, 2017) The figure below describes impact of a set price floor in
pecan market.
Figure 1: Effect of price floor
In the above figure DD denotes the demand of pecan and SS denotes the supply curve.
The equilibrium price and quantity in the market is P* and Q* respectively. Now suppose
government imposes a price floor at P1. At the higher price consumer reduces their demand to Q1
while supply increases to Q2. As supply exceeds demand, there is an excess supply of (Q2 – Q1)
in the market. Surplus to the consumers reduces following a higher price. The income of the
farmers increases as they receive a higher price (Jain & Ohri, 2015) The policy of price floor will
be successful if the government is ready to purchase the excess supply. Larger the excess supply
greater is the burden to the government to purchase the excess. The difference between supply