Cambodian Mekong University

is the university that cares for the value of education

Assignment
EC221: Intermediate Microeconomics
I. Problems
1. The following function describes the demand condition for a company that caps featuring name of
college and professional team in a variety of sports.
Q = 2,000 – 100 P, Where Q is cap sale and P is price.
a. Compute the caps could be sold at $12 each.
b. Compute the price be in order for the company to sell 1,000 caps.
c. Compute the price would cap sale equal zero.

2. Consider the following supply and demand curves for a certain product.
QS = 25,000 P
QD = 50,000 – 10,000 P
QD 40 30
P 1 2
QS 25 50
P 1 2

a. Plot the demand and supply curves

b. Compute the equilibrium price and equilibrium quantity for the industry.
3. The following relations describe the supply and demand for posters.
QD = 65,000 – 10,000 P
QS = – 35,000 + 15,000 P
Where Q is the quantity and P is the price of a poster, in dollars.

a. Complete the following table.

Price ($) QS QD Surplus or Shortage

6 55000 5000
5 40000 15000
4 25000 25000
3 10000 35000
2 -5000 45000
 1 -20000 55000

b. Calculate the equilibrium price and quantity

4. The following relations describe monthly demand and supply fir a computer support service
catering to small businesses.
QD = 3,000 – 10 P
QS = – 1,000 + 10 P
Where Q is the number of businesses that need services and P is the monthly fee, in dollars.
a. At what average monthly fee would demand equal zero?
b. At what average monthly fee would supply equal zero?
c. Plot the supply and demand curves

QD 500 1000 1500

P 250 200 150
QS 500 1000 1500
P 150 200 250

d. What is the equilibrium price/output level?

e. Suppose demand increases and leads to new demand curve:
f. Suppose the new suppliers enter the market due to the increase in demand, so that the new
supply curve is Q = –500 + 10 P.
What are the new equilibrium price and equilibrium quantity?
g. Show these changes on the graph?

5. The demand function for cola-type soft drink in general is Q = 20- 2 P where Q stands for quantity
and P stand for price.
a. Calculate point elasticity at price of $5 and $9. Is the demand curve elastic or inelastic at these
points?
b. Calculate arc elasticity at the interval between P = $5 and P = $6

6. The equation for the demand curve has been estimated to be Q = 100 – 10 P + 0.5Y, where Q is
quantity, P is price, and Y is income. Assume P = 7 and Y = 50.
a. Interpret the equation
b. Compute the price elasticity
c. What is income elasticity
d. Compute the price elasticity at P = $8,Y = $70
7. You are given the following table:

Variable Factor TP AP MP

0 0 - -
1 55.50
2 120.00
3 190.50
4 264.00
5 337.50
6 408.00
7 472.50
8 528.00
9 571.50
10 600.00
11 610.50
12 600.00
13 565.50
a. The law diminishing returns occurs at what units of input? Why?
b. The increase marginal return occurs at what units of output? Why?

8. Complete the table

Q TC TFC TVC AC AFC AVC MC

0 120.00 0.00 - - - -
1 145.00
2
3
4
5
6
7
8
9
10

9. Calculate all costs

 Q TFC TVC TC AVC ATC MC
0 - - -
1
2
3
4
5

Q TFC TVC TC AVC ATC MC

0 - - -
1
2
3
4
5
6
7
8
9
10

Q TFC TVC TC AVC ATC MC

0 - - -
1
2
3
4
5
6
7
8
9
10
Section II: Case study
1) Company XYZ reports profit of one million dollars last year and is on the track to exceed those
profits this year. XYZ operates in a very competitive market where many of the firms are
merging in an attempt to gain competitive advantages. Currently, the company’s top
management is paid with a fixed salary that does not include any performance bonuses.
Explain why this manager might nonetheless have a strong incentive to maximize the firm’s
profits.

2) You are the manager of a small Cambodian firm that sells sugar in a competitive market. This
morning you read the newspaper, and you see that there is a new factory to be built in
Kompong Speu to produce sugar. Furthermore, due to the fact that the diabetes becomes the
first concern of the people, the sugar demand will decline. Based on these two factors, what
should you do to optimize your profit?

3) A market may be resistant to new products, especially if these items are difficult to operate. To
overcome resistance, marketers may use one or combination of the following methods:
- Free trial period with money-back guarantee;

- Free or low-cost lessons on usage of the products/service;

- Allowing the product to be bought piecemeal;

- Selling a basic unit with options for upgrading or add-ons; Option

- Special offers/packages
What are the benefits of these strategies?
1) Currently, there are so many new beer brands in Cambodia. If you are the manager of
Angkor beer, what are your strategies to get maintain your leading position as well as get
bigger market share?

Dateline: 16-September-2014, Time: 7:00pm