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There are an infinite number of firms that can engage in research and development at a cost of $5 cach. The R&D is risky and may or may not be successful. If successful, a new product will be developed with a demand curve ofQ(p) 200 10p and a cost of production equal to C(q) = 10q in each period of time. The discount factor is 8.5. If n firms engage in R&D, the probability of atleast one success is p(n) = 1-e with a = 0,2031.a. Suppose that once the product is developed all firms will be able to freely enter the industry and copy the product. How many firms will engage in R&D?b. Suppose that the government offers research grants to pay the cost of research in this product. How many such grants should the goverment offer?c. Suppose that the government offers a prize for the first firm to develop this product. Each firm doing R&D thinks it is equally likely to be first. That is, the probability of winning the prize is How large of a prize should the government offer?
I'm given a utility function U=xy and MUx=y while MUy=x. Price of x is $2 and the income is $40. To maximize utility subject to the budget constraint, 5 units of y is purchased.
QUESTION: What must be the price of y and the amount of x consumed?
Thank you :)
1. Identify and explain the type of price elasticity of demand of Starbucks Coffee with the aid of the diagram (10)
2. ''Starbucks is measured on luxury goods both high quality and high price''
With reference to the text above and the concept of income elasticity, draw a diagram and explain what would to the demand for Starbucks Coffee as income increases. (10)
3. With the aid of a diagram identify and explain the determinants of supply that would results in an increase and decrease in supply of Starbucks Coffee (10)
) Compare the absolute Advantage theory of trade with the Comparative advantage theory of
trade. A country can have a comparative advantage in producing a good even if it is
absolutely less efficient at producing that good. Do you agree? Explain using an example.
Colgate sells its standard size toothpaste for Rs. 25. Its sales have been on an average 8000 units per month over the last year. Recently, its competitor Sparkle reduced the price of its same standard size toothpaste from Rs. 35 to Rs. 30. As a result Colgate sales declined by 1500 units per month.
i) Calculate the cross elasticity between the two products.
ii) What does your estimate indicate about the relationship between the two?
Ali’s budget line relating good X and good Y has intercept of 50 unit of good X and 20 units of good Y. if the price of good X is 12, what is Ali’s income? What is the price of good Y? What is then slope of budget line?
2.Alif and Rehana run a furniture business from their home. State, which of the following represents an explicit cost of the business and which represents an implicit cost?
a) Wages paid to a part-time helper.
b) The job at a larger furniture showroom that Rehana gave up in order to run the business.
Hermes is a luxury designer brand. Among the one-of-a kind designer handbags it sells, one of its most renowned styles is the Hermes Birkin made from rare crocodile skin. What kind elasticity do you think the supply of these handbags would be like? Briefly explain why and sketch the supply curve.
1. One of the pandemic measures adopted by the city of Regina consists of a food-delivery fee cap (maximum fee) of 14% of the pre-tax order price. This fee is charged by delivery services such as Uber Eats, DoorDash, and Skip the Dishes. Some restaurants in the city argue that the cap (in percentage terms) is to high due to the small profits earned in this industry.
1.1. Represent graphically the equilibrium in the market for food (restaurants) in the city in the absence of any interventions. (2 marks)
1.2. Show the effect of the food-delivery fee cap on the outcome of this market and consumer and producer surplus. (2 marks)
1.3. Explain and show graphically why some restaurants in the city complain about the food-delivery fee cap being too high. (2 marks)
If household income in the GCC has decreased 18% over the past year, and new car sales in the region have decreased from 1.1 million to 875,000. Does this indicate that cars are normal or inferior goods? Show your calculations.
