Latoya Graham earns a monthly income of $15,500. However, she enjoys swimming and playing netball and she plan to spend $3,500 of her income on both. Information from the market

CARIBBEAN MARITIME UNIVERSITY

FACULTY OF SHIPPING & LOGISTICS

Micro Economics – Academic Year 2022/2023

Group Assignment – 15% – Due on April 27, 2023

The response to the questions MUST be typed and formatted following APA latest edition style.

Question One – 45 marks

Latoya Graham earns a monthly income of $15,500. However, she enjoys swimming and playing netball and she plan to spend $3,500 of her income on both. Information from the market states that to use the pool per day cost $500 and to use the netball court cost $250 per day.

a. Draw Latoya Graham’s budget line. Putting netball on the X- axis. (10 marks)

b. What is the opportunity cost of Latoya swimming 3 ½ days per month if swimming increase to $1,000 per day and netball increase to $500 per day? Show the budget line and workings                                                                                       (10 marks)

c. Suppose she increase her spending to $5,000 per month, show Latoya new budget line given the initial costs.                                                                              (5 marks)

d. Suppose the cost of playing netball falls to $200 per day, what is the impact of this on Latoya old budget line?                                                                      (5 marks)

e. Suppose the cost of swimming rises to $700 per day, what is the impact of this on Latoya oldbudget line?                                                                 (5 marks)

f. Analyse by showing indifference curves on how Latoya Graham can maximize her satisfaction given a budget constraint of $1,500.                                     (10 marks)

Question Two – 55 marks

Quantity

Price

TR

TC

Profit

   AR

MR

MC

FC

VC

  AFC

ATC

AVC

0

  24

 

10

 

 

 

 

 10

 

 

 

 

1

 

 

24

 

 

 

 

 

 

 

 

 

2

 

 

     44

 

 

 

 

 

 

 

 

 

3

 

 

66

 

 

 

 

 

 

 

 

 

4

 

 

90

 

 

 

 

 

 

 

 

 

5

 

 

120

 

 

 

 

 

 

 

 

 

6

 

 

156

 

 

 

 

 

 

 

 

 

Given the above table answer all the questions that follows –

a.      Fill in the blank spaces and show all workings                                  (25 marks)

b.     Construct two graphs. Label one graph A and the other B.

i) On graph A plot the total cost, variable cost, total revenue and fixed cost curves.                                                                                   (5 marks)

ii) On graph B, plot the marginal cost, marginal revenue, average revenue, average variable cost, average fixed and average total cost curves.                                                                                                 (10 marks)

c.      Analyse whether the firm should continue operation or shut down in the short run. Give reason/s for your response.                                                 (5 marks)

d.     Identify and shade the profits or losses area including the price.      (5 marks)

e.      Identify the firm maximum profits equilibrium quantity.  Give reason/s for your response.                                                                                             (5 marks)