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Fadzi's demand curve for food is Q=10-2p. Her price elasticity of demand for food at price P*equals -2/3. How much is P*?
The productive capability of an economy is such that to produce 5 units of military good it takes 2 workers to be employed while 10 units of consumer goods require 3 workers. Resources are limited in such a way that only 75 units of military good can be produced when all resources are employ
Suppose that the quantity of corn supplied depends on the price of corn (P) and the amount of rainfall (R). The demand for corn depends on the price of corn and the level of disposable income (I). The equations describing the supply and demand relationships are Qs = 20R + 100P and Qd = 4000 − 100P + 10I.
a) Sketch a graph of demand and supply curves (1 marks)
Use the demand curve diagram below to answer the following question.
I. What is the own-price elasticity of demand as price increases from N$2 per unit to N$4 per unit? Use the mid-point formula in your calculation.
II. Suppose that a 2% increase in price of cabbage results in a 6% decrease in quantity demanded of cabbage. Calculate own-price elasticity of demand.
III.If own-price elasticity of demand equals 0.3 in absolute value, then what percentage change in price will result in a 6% decrease in quantity demanded?
I Want to know how to find the amount of workers in the economy
11. Patty’s Pizza has the production function per hour shown in the table below. The hourly wage rate for each worker is $10. Each pizza sells for $2.
Quantity of workers - 0, 1, 2, 3, 4, 5.
Quantity of pizza - 0, 9, 15, 19, 22, 24.
Now, let’s assume that Patty buys a new high-tech pizza oven that allows her workers to become twice as productive as before. That is, the first worker now produces 18 pizzas per hour instead of 9, and so on.
e) Calculate the new MPL and the new VMPL at the original price of $2 per pizza using the new information above. f) Using answer (e) determine how Patty’s hiring decision responds to this increase in the productivity of her workforce when the wage rate is $10, i.e., will she hire more workers or less workers than before or not change the number of workers? (use a diagram)
10. Patty’s Pizza has the production function per hour shown in the table below. The hourly wage rate for each worker is $10. Each pizza sells for $2.
Quantity of workers - 0, 1, 2, 3, 4, 5.
Quantity of pizza - 0, 9, 15, 19, 22, 24.
a) Calculate the marginal product of labor (MPL) for each worker and the value of the marginal product of labor per worker (VMPL). b) Draw the VMPL curve and use your diagram to state how many workers Patty should employ. c) Suppose, the hourly wage rate rises to $15. State, how many workers she will hire now? Show in the same diagram as b). d) Now the price of pizza increases to $4, wage rate is $10. Calculate the VMPL per worker, and draw the new VMPL curve in a new diagram. Use your diagram to determine how many workers Patty should employ now.
2. Sketch an appropriately labelled diagram for a perfectly competitive firm that incurs loss in the short run and will shut down in the short run.
3. Answer using the accompanying total revenue schedule of Emerald, Inc., a producer of emeralds.
Quantity of emeralds - 1, 2, 3, 4, 5.
Total revenues - 100, 186, 252, 280, 250.
a) Calculate the demand schedule. b) Calculate the marginal revenue schedule.
c) Is the company a perfectly competitive firm or a monopoly? Why?
2. The market for corn is perfectly competitive and all firms are in long-run equilibrium currently. What will happen in the market if the incomes of corn consumers rise, assuming corn is an inferior good? Use two appropriately labelled graphs of the market and the individual perfectly competitive firm to explain.
3. A movie production company is planning to make its new movie available online so that it can enjoy monopoly power. Each time the movie is downloaded the production company has to pay 4 taka to the internet service provider. Now it is deciding what price to charge for each download. The numbers below shows the demand schedule for the company, Price per download dollar - 10, 8, 6, 4, 2, 0. Quantity of downloads demands 0, 1, 3, 6, 10, 15.
a) Calculate the total revenue and marginal revenue per download.
b) To maximize profit what price should be charged and how many downloads would need to be sold?
1. Briefly discuss two major differences between the theory of perfect competition and the theory of monopoly. 2. What reasons make the demand curve of a perfectly competitive firm completely horizontal? Only state.
3. Represent the information below in an appropriately labelled diagram with the relevant curves, and decide whether the firm should continue production or shut down in the short run, using calculations. A perfectly competitive firm produces 100 mugs to maximize its profit. The average total cost (ATC) is 13 taka per mug and the average fixed cost (AFC) is 4 taka per mug when the firm produces 100 mugs. The firm charges a price of 12 taka per mug.
4.When would a firm be considered a natural monopoly? Explain briefly.
