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What is the difference between a positive and a normative statement? Give an example of each.
A monopolist operates under two plants, 1 and 2. The marginal costs of the two plantsare given by MC1 = 20 + 2q1 and MC2= 10 + 5q2 where q1 and q2 represent units of output produced by plant 1 and 2 respectively. If the price of this product is given by 20 –3(q1 + q2), how much should the firm plan to produce in each plant, and at what price should it plan to sell the product?
If the government were to intervene in this market by taxing suppliers, what would happen to prices in the short run and in the long run?
Select one market to focus on. Clearly indicate the market and describe the market structure. For example, is it perfectly competitive? Is an oligopoly market? And so on.
• You are free to select any market of your choosing. For example, the global market for copper, the market for housing in London, the market for cheese in the United States, etc… You will have more to talk about for some markets than for others, and you must ensure you can find the appropriate price data.
What is an oligopoly? In oligopoly markets, how do businesses make decisions?
Explain intuitively why marginal revenue is less than the price for a monopolist, but marginal revenue is equal to the price for a perfectly competitive firm
Discuss 2 determinants each of the price elasticity of demand and the price elasticity of supply
For lunch, Wendy eats only salads or fruit & yogurt smoothies. Her weekly food budget is $100. Each salad costs $5 and each smoothie costs $10.
a. Draw Wendy’s budget constraint.
b. What is the opportunity cost of purchasing one more smoothie? What is the opportunity cost of purchasing one more salad?
c. If the price of smoothies doubles to $20, what happens to Wendy’s opportunity set?
d. Describe intuitively how Wendy should make the optimal consumption decision.
Wheat and oats are used to make different types of breakfast cereal and both are grown on the prairies. Use appropriate diagrams in your answers.
a. What would happen to the supply and demand of oats if the price of wheat were to fall? What happens to the equilibrium price and quantity of oats?
b. What would happen to the equilibrium price of wheat and oats if there was a drought in the prairies?
Consider the market for ice cream in Paris. Using appropriate diagrams, explain how each of the following events will impact the equilibrium price and quantity of ice cream.
a. The population of Paris falls.
b. The cost of milk (an input in production) increases.
c. Both the population of Paris falls and the cost of milk increases at the same time.
