Economics Answers

5. 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

4. 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.

2. 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.

1. 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.

Draw the indifference curve for someone deciding how to allocate time between
work and leisure.Suppose the wage increases. Is it possible that the person’s
consumption would fall? Is this plausible? Discuss

Anya is awake for 100 hours per week.Using one diagram,show Anya’s budget
constraints if she earns $12 per hour, $16 per hour, and $20 per hour. Now draw
indifference curves such that Anya’s labor-supply curve is upward-sloping when
the wage is between $12 and $16 per hour and backward-sloping when the wage
is between $16 and $20 per hour

The price of cheese rises from $6 to $10 per pound,while the price of wine
remains $3 per glass.For a consumer with a constant income of $3,000,show
what happens to consumption of wine and cheese.Decompose the change into
income and substitution effects

Ken walks into an ice-cream parlor.Waiter:“We have vanilla and chocolate today.”
Ken:“I’ll take vanilla.”Waiter:“I almost forgot.We also have strawberry.”Ken:“In
that case,I’ll take chocolate.”What standard property of decision making is Ken
violating?

Describe at least three ways in which human decision making differs from that of
the rational individual of conventional economic theory.