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The price of oil has been all over the place in the last few years; it went up, then down and back up, back down, and now edging up again, thus driving the price of gas up and down. Right now, it is $2.19 where I buy gas, very low compared to two years ago. Related to that is the cost of refining it into a usable product. We actually have plenty of oil right now; it is scarce, but plentiful, especially with the new development of shale oil fields in the Dakotas and in Texas. However, the country has limited refinery capacity and we have not built a new refinery in over 20 years. The Keystone pipeline, if it is ever built, will carry oil from Canada and North Dakota all the way to Texas to be refined into gas and then trucked back to places like North Dakota and Nebraska.
Why not refine some of that oil in the region, thus saving a lot of shipping cost?
Why wouldn't the oil companies build refineries nearer their sources or their markets?
For a price taker P=MR. True or false
Assuming that the equation f(Q, P1, P2, Y) = 10P1Q1 + 5Q1 - 2P2 - 4Y -18 =0
defines an implicit demand function Q1 = Q1(P1, P2, Y), find own price elasticity , cross elasticity and income elasticity at a point (P1, P2, Y) = (2, 1, 20)
Does a monopoly's ability to price discriminate between two groups of consumers depend on its marginal cost curve? Why or why not? Consider two cases
a) the marginal cost is so high that the monopoly is uninterested in selling to one group
b) the marginal cost is low enough that the monopoly wants to sell to both groups
Use diagrams to explain the difference in efficiency in the long run position for a competitive market structure and a monopolistic market structure
Use diagrams to explain first, second and third degree price discrimination
A firm produces 500 units of output. At this production level the firm’s marginal cost of production is £180 and the firm’s total cost of production is £55,500. At this level of production, the firm exhibits increasing or decreasing returns to scale, show your working
A firm has the following information on production and costs from past data:
Output (Y) 0 6 12 18
Total Cost (TC) 9 2775 5361 8199
If the total cost function is known to be
TC =aY3 +bY2 +kY + f , and the demand for the product of the firm is Y = 320 − (1 2)⋅ P answer the following:
• Determine the coefficients of the cubic cost function.
• Derive all cost and revenue curves and the profit function.• Show that the MC cuts the AVC when AVC is at its minimum point. Plot the relevant graph indicating all points.
• Calculate the break even and profit maximizing levels of output and price.
• What is the relationship between price, marginal revenue and own price elasticity of demand at the profit maximization point.
Donald derives utility from only two goods, carrots (X) and donuts (Y). His utility
function is as follows: U(X,Y) =X0.1 Y0.9 . Donald has an income (M) of $900 and the price of carrots (PX) and donuts (PY) are $45 and $90 respectively. Based on this information, What quantities of carrots and donuts will maximize Donald's utility?
In Nyeri town there are only two milk processors. The local inverse demand for milk is given by: Q = 120− P, where P denotes price, Q denotes the total quantity measured in cartons. Both milk processors have the same cost function given by C = 30Q, where C is total cost and Q is output measured in cartons. What is the industry output (Q)?
