Economics Answers

CONSIDER THE FOLLOWING SHORT RUN PRODUCTION FUNCTION Q=6L2-0.4L3
a. find the value of L that maximizes out put
b find the value of L that maximizes MARGINAL PRODUCT
c. find the value of l that maximizes average product

Consider the market for rental housing in Yourtown. The demand and supply schedules for rental housing are given in the table.
Price
($ per month) Quantity Demanded (thousands of units) Quantity Supplied
(thousands of units)
1100 40 80
1000 50 77
900 60 73
800 70 70
700 80 67
600 90 65
500 100 60

a. In a Free market for rental housing, what is the equilibrium price and quantity?
b. Now suppose the government in Yourtown decides to impose a ceiling on the monthly rental price. What is the highest level at which such a ceiling could be set in order to have any effect on the marker? Explain your answer.
c. Suppose the maximum rental price is set equal to $500 per month. Describe the effect on quantity demanded, supplied, and exchanged in the rental-housing market.
d. Suppose a black market develops in the presence of the rent controls in part (c). What is the black market price that would exist if all of the quantity supplied were sold on the black market?

A firm produces cellular telephone service using equipment and labor. When it uses E machine-hours of equipment and hires L person-ours of labor, it can provide up to Q unites of telephone service. The relationship between Q, E, and L is as follows: Q = EL . The firm must always pay PE for each machine-hour of equipment it uses and PL for each person-hour of Labor it hires. Suppose the production manager is told to produce Q=200 units of telephone service and that she wants to choose E and L to minimize costs while achieving that production target.
a) What is the objective function for this problem?

Suppose that the money saved in the bank by the households is channelled to finance investments by the firms. What would be the impact on the aggregate expenditures if marginal propensity to consume (MPC) increased from 0.65 to 0.8?

Why is the natural rate of unemployment not equal to zero

DEMAND DEFINITION BY BENHAM - “The demand for anything, at a given price, is the amount of it, which will be bought per unit of time at that price.”

PLEASE explain this definition and its meaning.

You are working for Langley Lettuce Ltd. Life is good! But your boss is confused and rushes in ! “Look at this mess of data the accountants have given me! I can’t make any sense of it. All I want to know is: How much should I produce? What should I charge? What will my profit be? And the economist on the radio this morning said that lettuce is selling into a perfectly competitive market. What the heck does that mean?” You look at the numbers and give your boss some answers
Qd P $ TC $ ATC $ MC $ TR $ MR $ Profit $
0 60 --- ---
600 180
1000 240
1200 264
1500 0.24 336

A year ago, Akashdeep left his job at the Best Bicycle Repair Shop, and opened his own business: the “Even Better Bicycle Repair Shop”. He had been earning $40,000 per year at Best Bicycle. His total revenue at “Even Better” was $95,000. To open his shop, Akashdeep cashed in a $10,000 savings certificate which was earning 2% interest per year. His costs for the year were $25,000 to rent his uncle’s garage and $5,000 for supplies.
a) What were Akashdeep’s total explicit costs for the year?
b) What were Akashdeep’s total implicit costs for the year?
c) What was Akashdeep’s accounting profit for the year?
d) What was Akashdeep’s economic profit for the year?

extra-strength headache pills sold in a country.
Price (per pill) Qd (thousand) Qs (thousand)
1.5 20 0
2.0 15 6
2.5 10 10
3.0 7 13
3.5 5 15

Assume that consumers of the extra-strength headache pill lobby the government, to say that the equilibrium price of these pills is too high. Assume the government accepts the consumers argument.
a) Will the government introduce a price floor or a price ceiling policy?
b) Will the government legislate a price of $2.00 per pill or $3.00 per pill?
c) At this legislated price, will there be a shortage or surplus of pills?
d) How much of a shortage or surplus?

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market, that is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts?
a. Demand increases and supply decreases
b. Demand increases and supply is constant