Q-1- Name the three (3) fundamental properties, or characteristics that we have studied for any production transformation process.(The blue-print of production).

Then, provide a simple numerical example for each one of the three properties.

The three (3) properties are:

1....

2....

3....

Numerical examples for the three (3) properties are:

1....

2....

3....

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Q-2-For the great majority of the American people coffee and tea are substitute products.

Assume that due to the very bad weather, the coffee production in Columbia and other places have decreased drastically.

Question:What do you think will happen to the price of coffee (increase, decrease, remain the same, or there is not enough information to tell), and what will happen to the price and quantity of tea?

Answers:The price of coffee will.....

The price of tea will...

The quantity of coffee will...

The quantity of tea will...

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Q-3-Currently, the price of a product sold in a free, open and competitive market is $10, and the quantity bought and sold at this price is 10,000 units per week.

Because many new customers join the market to buy the product, the demand for the product has increased.At the same time more new firms have started to produce and sell this product.

Question:What will happen to the price of the product (increase, decrease, remain the same, or there is no way to tell)?What will happen to the quantity sold (increase, decrease, remain the same, or there is no way to tell)?Provide the necessary graph to support your answers.

Answers:

(1)The price of the product will ...

(2)The quantity of the product will ...

(3)Graph ...

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Q-4-(A)Because a business firm is a monopoly, its owner will charge his customers the highest price for his product.True, or False?

Answer:___________

(B)If the firm's marginal cost curve is Ushaped, and if the given market price cuts across theU , then the upside cut is in the quantity of maximum profit, and the downside cut is in the quantity of the minimum profit.True, or False?

Answer:___________

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(Q-5)-Consider a free, open and competitive market where the market demand and market supply lines determine the equilibrium price and quantity of the product bought and sold.

Now, due to new and improved technology the firms use to produce the product, the market supply of the product has increased and as a result there is a new equilibrium price and quantity bought and sold.

Explain what will happen to the total expenditure of the consumers (increase, decrease, remain the same) when they buy the new quantity at the new equilibrium price, if(a) the demand for the product is elastic,(b)inelastic,or(c) unit elasticity.

Answers:

(a)If the demand is elastic, then the total expenditure will ...

(b)If the demand is inelastic, then the total expenditure will ...

(c)If the demand is unit elasticity, then the total expenditure will ...

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(Q-6)-The equilibrium price of a product which is sold in a free, open and competitive market is determined by the market demand and the market supply of the product.However, sometimes the current market price of the product is not at its equilibrium level.Explain how and why the equilibrium price of the product will be reached.Provide a simple numerical example and draw a graph in order to support your explanation.

Explanations and Graph .....