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Microeconomics
if we observed that more ice-cream is purchase this year than last year. we may conclude that demand has increased and therefore the the prices must have increased?explain
Microeconomics
Hungry Henry Hippo and Ravenous Rachel Raccoon live in different parts of the forest, but they happen to have the exact same preferences over three goods: apples, bananas, and cherries. The prices facing Henry are , 19B , pc) = (1, 1, l) , and the prices facing Rachel are (PA, , pc) = (3, l, 2) . You observe that Henry chooses consumption
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vector a,b , c- = (6, 24, 6), and you observe that Rachel chooses ê = 8. Unfortunately,
you were distracted by a lion, so you did not observe Rachel's choices or b . You also do not directly observe Henry's wealth i' or Rachel's wealth i . You do know that their preferences are locally non-satiated.
a. Find the set of values of ,b that are consistent with the weak axiom of revealed preference. Draw a graph of that set.
b. Now suppose that the lion tells you that Henry and Rachel's preferences can be represented by a Cobb-Douglas utility function u(a,b,c) = a Œ b P cY where > 0. Find ô,b). Does it lie in the set that you found in part a?
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vector a,b , c- = (6, 24, 6), and you observe that Rachel chooses ê = 8. Unfortunately,
you were distracted by a lion, so you did not observe Rachel's choices or b . You also do not directly observe Henry's wealth i' or Rachel's wealth i . You do know that their preferences are locally non-satiated.
a. Find the set of values of ,b that are consistent with the weak axiom of revealed preference. Draw a graph of that set.
b. Now suppose that the lion tells you that Henry and Rachel's preferences can be represented by a Cobb-Douglas utility function u(a,b,c) = a Œ b P cY where > 0. Find ô,b). Does it lie in the set that you found in part a?
Microeconomics
The retail price of an EpiPen is $300, while industry sources estimate that it costs around $30 to produce each unit (i.e. one dose). Despite this high price, Mylan sells 1 million units a year.
Derive the marginal revenue function. If the marginal cost of production is constant at
$30, calculate the producer surplus, consumer surplus, and deadweight loss from
monopoly pricing
Derive the marginal revenue function. If the marginal cost of production is constant at
$30, calculate the producer surplus, consumer surplus, and deadweight loss from
monopoly pricing
Microeconomics
The pricing of pharmaceutical products can be controversial. A recent example is EpiPen
produced by Mylan which is used to treat anaphylaxis. The retail price of an EpiPen is
$300, while industry sources estimate that it costs around $30 to produce each unit (i.e.
one dose). Despite this high price, Mylan sells 1 million units a year.
Derive the marginal revenue function. If the marginal cost of production is constant at
$30, calculate the producer surplus, consumer surplus, and deadweight loss from
monopoly pricing.
produced by Mylan which is used to treat anaphylaxis. The retail price of an EpiPen is
$300, while industry sources estimate that it costs around $30 to produce each unit (i.e.
one dose). Despite this high price, Mylan sells 1 million units a year.
Derive the marginal revenue function. If the marginal cost of production is constant at
$30, calculate the producer surplus, consumer surplus, and deadweight loss from
monopoly pricing.
Microeconomics
The United States has plans to spend billions of dollars on a mission to Mars. List some of the possible opportunity costs of the mission. What resources will be used to execute the mission, and what do we sacrifice by using these resources in a mission to Mars
Microeconomics
The Eastern Shuttle, Inc., is a regional airline providing shuttle service between New York and
Washington, DC. An analysis of the monthly demand for service has revealed the following
demand relation:
Q = 26,000 – 500P – 250POG + 200IB – 5,000S
Where: Q is quantity measured by the number of passengers per month, P is price ($), POG is
a regional price index for other consumer goods (1967 = 1.00), IB is an index of business activity,
and S, a binary or dummy variable, equals 1 in summer months and 0 otherwise.
A. Determine the demand curve facing the airline during the winter month of January if POG
= 4 and IB = 250.
B. Determine the demand curve facing the airline, quantity demanded, and total revenues
during the summer month of July if P = $100 and all other price-related and business
activity variables are as specified previously
Washington, DC. An analysis of the monthly demand for service has revealed the following
demand relation:
Q = 26,000 – 500P – 250POG + 200IB – 5,000S
Where: Q is quantity measured by the number of passengers per month, P is price ($), POG is
a regional price index for other consumer goods (1967 = 1.00), IB is an index of business activity,
and S, a binary or dummy variable, equals 1 in summer months and 0 otherwise.
A. Determine the demand curve facing the airline during the winter month of January if POG
= 4 and IB = 250.
B. Determine the demand curve facing the airline, quantity demanded, and total revenues
during the summer month of July if P = $100 and all other price-related and business
activity variables are as specified previously
Microeconomics
The Creative Publishing Company (CPC) is a coupon book publisher with markets in several
southeastern states. CPC coupon books are either sold directly to the public, sold through
religious and other charitable organizations, or given away as promotional items. Operating
experience during the past year suggests the following demand function for CPC’s coupon
books:
Q = 5,000 – 4,000P + 0.02Pop + 0.5I + 1.5A
Where: Q is quantity, P is price ($), Pop is population, I is disposable income per household ($),
and A is advertising expenditures ($).
A. Determine the demand faced by CPC in a typical market in which P = $10, Pop = 1,000,000
persons, I = $30,000, and A = $10,000.
B. Calculate the level of demand if CPC increases annual advertising expenditures from
$10,000 to $15,000.
C. Calculate the demand curves faced by CPC in parts A and B.
southeastern states. CPC coupon books are either sold directly to the public, sold through
religious and other charitable organizations, or given away as promotional items. Operating
experience during the past year suggests the following demand function for CPC’s coupon
books:
Q = 5,000 – 4,000P + 0.02Pop + 0.5I + 1.5A
Where: Q is quantity, P is price ($), Pop is population, I is disposable income per household ($),
and A is advertising expenditures ($).
A. Determine the demand faced by CPC in a typical market in which P = $10, Pop = 1,000,000
persons, I = $30,000, and A = $10,000.
B. Calculate the level of demand if CPC increases annual advertising expenditures from
$10,000 to $15,000.
C. Calculate the demand curves faced by CPC in parts A and B.
Microeconomics
Kitty Russell’s Longbranch Cafe in Sausalito recently reduced Nachos Supreme appetizer prices
from $5 to $3 for afternoon “early bird” customers and enjoyed a resulting increase in sales
from 60 to 180 orders per day. Beverage sales also increased from 30 to 150 units per day.
A. Calculate the arc price elasticity of demand for Nachos Supreme appetizers.
B. Calculate the arc cross-price elasticity of demand between beverage sales and appetizer
prices.
C. Holding all else equal, would you expect an additional appetizer price decrease to $2.50
to cause both appetizer and beverage revenues to rise? Explain
Hint: For Arc use average price (P1+ P2/2) and quantity as average quantity (Q1+Q2/2).
from $5 to $3 for afternoon “early bird” customers and enjoyed a resulting increase in sales
from 60 to 180 orders per day. Beverage sales also increased from 30 to 150 units per day.
A. Calculate the arc price elasticity of demand for Nachos Supreme appetizers.
B. Calculate the arc cross-price elasticity of demand between beverage sales and appetizer
prices.
C. Holding all else equal, would you expect an additional appetizer price decrease to $2.50
to cause both appetizer and beverage revenues to rise? Explain
Hint: For Arc use average price (P1+ P2/2) and quantity as average quantity (Q1+Q2/2).
Microeconomics
NEXT is contemplating a T-shirt advertising promotion. Monthly sales data from T-shirt shops
marketing the “Eye Watch NEXT” design indicate that
Q = 1,500 – 200P
Where: Q is T-shirt sales and P is price.
A. How many T-shirts could NEXT sell at $4.50 each?
B. What price would NEXT have to charge to sell 900 T-shirts?
C. At what price would T-shirt sales equal zero?
D. Calculate the point price elasticity of demand at a price of $5?
marketing the “Eye Watch NEXT” design indicate that
Q = 1,500 – 200P
Where: Q is T-shirt sales and P is price.
A. How many T-shirts could NEXT sell at $4.50 each?
B. What price would NEXT have to charge to sell 900 T-shirts?
C. At what price would T-shirt sales equal zero?
D. Calculate the point price elasticity of demand at a price of $5?
Microeconomics
A market's demand and supply are given as follows: Supply is equal to 3p, and demand is equal to 120-5p. An excise tax is imposed on this market at a rate of $8 per traded unit. At equilibrium, what is value of the tax revenue?
