Answer to Question #334592 in Microeconomics for Prince

Question

Taiwan is the major world supplier of semiconductor chips. A recent earthquake severely damaged the production facilities of the Taiwanese chip producing companies, sharply reducing the amount of chips they could produce.

a. Assume that the total revenue of a typical non-Taiwanese manufacturer rises due to this event. In term of an elasticity, what must be true for this to happen?

b. Illustrate the change in total revenue with a diagram, indicating the price effect and the quantity effect of the Taiwan earthquake on this company’s total revenue.

c. Now assume that the total revenue of the typical non-Taiwanese chip manufacturer falls due to these event. In terms of elasticity, what must be true for this to happen?

d. Illustrate the change in total revenue with a diagram, indicating the price effect and the quantity effect of the Taiwan earthquake on this company’s total revenue.