Dr. Seth Sacher Fall 2014Johns Hopkins UniversityM.A. Program in Applied EconomicsMicroeconomic Theory & PolicyThis course is about human decision making in the face of scarcity. Topics include:choice and demand; productionSolutions to Problem Set #91. Suppose a market is characterized by a duopoly. Also suppose that each firmmakes the Cournot conjecture (i.e. each firm believes that regardless of how muchit produces, the other firms output remains constant). Firm 1s outSolutions to Problem Set #81. Suppose two animals are fighting over one morsel of food. Each can eitherbehave like a hawk (i.e. be aggressive), or like a dove (i.e. be passive). Theyplay a game whose payoffs are shown in the table below. Solutions to Problem Set #71. The market demand curve for apples is QD = 300 P, and the market supplycurve is QS = (P 60)/2. a. Find the equilibrium price and quantity in the apple market. Given that we know that at the equilibrium QD = QS we have a sysSolutions to Problem Set 6Total cost areC .25q 2 .25 qA qL ,and demands areqA 100 2PAqL 100 4PL . First, in order to determine maximum profits, we need to get the inverse demandcurves (price as a function of quantity). For Australia and LaplaSolutions to Problem Set #41. A firms Production (or Total Product) function is given by:TP Q = 100A2 A3where A is the only input in the production process. a. Find the average product (AP) function. AP = Q/A = 100A A2b. Find the marginal product (MP)Solutions to Problem Set #31. For a price decrease, using Hicksian and Marshallian demand curves, graphconsumer surplus, the equivalent variation and the compensating variation. Which is largest? Smallest? Explain why. Refer to the below figure. Solutions to Problem Set #21. Using the method of Lagrange Multipliers, find the demand functions for X and Yfor the following utility function:U(X,Y) = X.75Y.25PXX + PYY = IThis is known as a Cobb-Douglas utility function. First we set up the LagranSolutions to Problem Set #1a. Normative. This statement is prescriptive in nature. Words likeshould or ought are good indicators of a normative statement. b. Positive. This is a testable hypothesis; one could scientificallyinvestigate the relationsh