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Midland Power and Light is the only seller of electricity in the area. The demand function facing the firm is Q = 250 – 0.5P
Where Q is quantity demanded and P is price. The firm total cost function is
TC = 100 – 10Q + 0.5Q, and the marginal cost is MC = -10 + Q
a/ Determine the profit-maximizing price and output rate for Midland.
b/ Determine the cost per unit, profit per unit, and total profit.
The first principle of economics discussed in Chapter 1 of Mankiws book is that people face trade-offs. Use a production possibilities frontier to illustrate societys trade-off between two goodsa clean environment and the quantity of industrial output. What do you suppose determines the shape and position of the frontier? Show what happens to the frontier if engineers develop a new way of producing electricity that emits fewer pollutants.
Imagine a society that produces military goods and consumer goods, which well call guns and butter. a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point that the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger peace dividend, measured by the increase in butter production? Explain
Draw a circular-flow diagram. Identify the parts of the model that correspond to the flow of goods and services and the flow of dollars for each of the following activities. a. Selena pays a storekeeper $1 for a quart of milk. b. Stuart earns $8 per hour working at a fast-food restaurant. c. Shanna spends $40 to get a haircut. d. Salma earns $20,000 from her 10 percent ownership of Acme Industrial.
Imagine that the aggregate production function is given by Y = F(K, AeL), in which e is workers’ effort. The function F satisfies the usual properties, including constant returns to scale in its two inputs, K and AeL. What happens if e increases?
Alpha Pharmaceuticals has a patent on a new medication used to treat high blood pressure, so it is the monopoly seller of this new drug product. The marginal cost of producing one dose of the drug is R10, and the elasticity of demand for the product is -3. What is the profit maximising monopoly price for this patented drug product
Bridge Coal Company is the only employer in a remote and mountainous region of the country, so the firm is the monopsony buyer of labor in the market. If the price of coal increases, then the firm's
A multiplant monopolist can produce her output in either of two plants. Having sold all of her output she discovers that the marginal cost in plant 1 is R30 while the marginal cost in plant 2 is R20. To maximize profits the firm will
Discuss the reason that led to the introduction of the basel capital accord.
If there is a successful advertising campaign promoting the health benefits of drinking milk, then, ceteris paribus
