Economics Answers

How will a simultaneous increase in the price of the substitute good and an improvement in production technology affect market demand and/or supply, equilibrium price and equilibrium quantity in a competitive market?

Every day josephine buys coffee and a lottery ticket she has a budget of 12$ . The coffee at the store she goes to costs 0.75$ and lottery tickets are 1.50 each . Graph josephine’s budget constraint by moving the endpoints of the line segment in the graph

Walmart sells exactly same goods cheaper in the US than in Canada. “But the United States is way larger market than Canada, so the demand for (almost) everything is greater in the USA, and Walmart should be charging the American buyers more!” What is wrong with this statement? (hint: think what price discrimination scheme is in place).

The demand is given by P = 20 – 0.1Q, where P is the price and Q is the quantity demanded. The monopolist’s total cost is C = 120 + 2Q + 0.05Q2. Find
a. Profit-maximizing price and quantity;
b. Monopolist’s profits
c. Consumer surplus
d. Deadweight loss

A monopolist faces a linear demand for its product and has a flat marginal and average cost of production. An innovation lowers the cost of production by $1 per unit. Use the graph to show the profit-maximizing monopolist’s choice and the changes due to the innovations.
a. How much will the price change as the result of the innovation?
b. How much will profit per unit change as the result of the innovation?
c. Summarize: who benefits from the innovation? Explain in 2-3 sentences.

3. Copyright duration in Canada is the creator of the works lifetime, plus 50 years from the end of the calendar year that the creator died. Presumably, the copyright creates incentives to produce creative work (because the author or copyright holder receives the royalties for the use of the copyrighted materials). But the author obviously cannot keep receiving the royalty after he or she dies! Explain how extending the copyright protection beyond the author life creates the incentives to produce creative work.

A government bond with face value $1,000 matures next year. This means that next year the government will send the bond holder a $1,000 cheque (the bond is not worth anything afterwards). If the interest rate is 2.8%, what is the bond’s market price today? Explain.

A business idea requires to spend $20,000 on training the staff this year and will save $1,000 a every year afterwards (because the staff is more productive).
a. Will the firm implement the idea if the interest rate is 4%? Explain.
b. Will the firm implement the idea if the interest rate is 8%? Explain.
c. At what interest rate is the firm indifferent between implementing the idea and abandoning it? Explain.

What will be the money supply, if the central bank purchases a government bond from an individual who deposits all the money that has been received from the sale in the bank?

6. Walmart sells exactly same goods cheaper in the US than in Canada. “But the United States is way larger market than Canada, so the demand for (almost) everything is greater in the USA, and Walmart should be charging the American buyers more!” What is wrong with this statement? (hint: think what price discrimination scheme is in place).