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explain how income and price of related goods can affect the quantity demanded of a good using graph and example
If the minimum point of the short run ATC curve for all firms (existing and potential) is also the minimum point of the long run average cost curve (LRAC), calculate the long-run equilibrium price, market quantity, and firm quantity. What is the long-run equilibrium number of firms in the industry?
Consider a firm’s profit function, p(x)=R(x) - C(x), where R(x) is total revenue as a function is output (x), and C(x) is total cost as a function of output (x).
1/ Under perfect competition, each firm is a price taker. Assuming a competitive market price , p* = 10 and a cost function, C(x) = (x-5)^2 , express the firm’s profit as a function of x.
2/ Find the competitive firm’s profit maximizing level of output, x*.
3/ If the firm we’re only interested in minimizing costs, what level of output would it choose?
Suppose the demand for cigarettes is Q = 15 - 0.5Pand the supply of cigarettes is Q = P - 3, where P is the price per pack of cigarettes. Suppose the government imposes a cigarette tax of $3 per pack.
(a) What is the price paid by producers?
(b) What is the price faced by consumers?
(c) What is the government revenue from the tax?
(d) What is the total dollar amount of tax revenue that is ultimately paid by consumers (i.e. consumers' tax burden)?
(e) What is the excess burden of the tax?
Billy Madison consumes 100 units of X and 50 units of Y. The price of x rises from 2 to 3. The price of Y remains at 4.
a/ how much must Billy’s income rise so that he can exactly afford 100 units of x and 50 units of y?
b/ Draw Billy’s original budget set when the price of X is 2
c/ Draw Billy’s budget set when the price of X is 3, but his income is unchanged
d/ Draw Billy’s budget set when the price of X is 3 and his income increases by the amount in (a) so that he can afford his original consumption bundle.
Consider a firm’s profit function, p(x)=R(x) - C(x), where R(x) is total revenue as a function is output (x), and C(x) is total cost as a function of output (x).
1/ Under perfect competition, each firm is a price taker. Assuming a competitive market price , p* = 10 and a cost function, C(x) = (x-5)^2 , express the firm’s profit as a function of x.
2/ Find the competitive firm’s profit maximizing level of output, x*.
3/ If the firm we’re only interested in minimizing costs, what level of output would it choose?
Suppose a firm operating in a perfectly competitive industry has costs in the short run given by:
SRTC = 8 + 1/2Q^2 and therefore MC = q.
if the minimum point of the short-run ATC curve for all firms(existing and potential)is also the minimum point of the long run average cost curve (LRAC), calculate the long-run equilibrium price, market quantity, and firm quantity. What is the long-run equilibrium number of firms in the industry?
Choco Cookies sell for $40/box, of which $10 consists of tax, and 66,666 boxes are sold every year. The price elasticity of demand for Choco Cookies is -4. All other cookies sell for $30/box (including a $l0 tax), and 40,000 boxes are sold every year. The cross price elasticity of demand for other cookies, with respect to a change in the price of Choco Cookies, is 0.5. The government raises the tax on Choco Cookies from $10 to $l1 per box, all of which is passed through to the consumer in the form of higher prices. Calculate the change in total government revenue. Should the government raise the tax? Why or why not? Explain your answer.
The demand for a good increases when the price of a substitute ________ and also increases when the price of a complement
Suppose you are a first year university student.
a. In what ways is your standard of living different from that of your (i) parents
and (ii) grandparents when they were your age?
b. Why have these changes occurred?
