Economics Answers

Consider a competitive constant-cost industry with many identical firms (i.e. firms with identical U-shaped cost curves). The demand curve in this market is downward sloping and the market is currently in a long-run equilibrium. Assume that there is an increase in demand, ceteris paribus. Compared to the initial long run equilibrium, which of the following statements is true?

A)In the new long run equilibrium price will be higher and each of the firms in the industry will be producing a greater amount of output.
B)In the new long run equilibrium price will be unchanged and each of the firms in the industry will be producing a greater amount of output.
C)In the new long run equilibrium price will be higher and each of the firms in the industry will be earning positive economic profit.
D)In the new long run equilibrium price will be unchanged and each of the firms in the industry will be earning zero economic profit.
E) None of the above.

Firms Tetra and Pak are the only producers of juice cartons (y). Both have the cost function:
C(y) = 2y²
The inverse demand function in the market for juice cartons is as follows:
P = 200 - 2y
Where P denotes the price of one juice carton.

A) Assume the firms behave according to the Cournot oligopoly model. Find the market equilibrium (outputs, prices and profits)

B) What would the market equilibrium be if firm Tetra behaved as a quantity leader instead, according to the Stackleberg model?

1.A bus company operates two routes. On route 1, research suggests tht the price elasticity is -0.5 and on the other route -2.5. The company has decided to revise fares upwards on both routes by 1% this year. Comment on the decision.


2.The owners of an oil filling station read an article in a trade publication stating that the own-price elasticity of demand for diesel is -0.3. because of this highly inelastic demand, they are thinking about raising prices at their stations to increase revenue and profits. Do you recommend this strategy based on the information they have obtained. Explain.

How did the Financial Industry, Transportation Industry and the Energy Industry benefit form freer trade with Iran

What would you expect to happen to the rents you can charge under the following conditions?
(i) A major organization in the city closes down.

When estimating a demand function, explain why fitting a line of best fit through observed
price and quantity combinations over time is not likely to yield good estimates.

Assume the following data for this economy. Full employment GDP occurs at $400.
Assume that the MPC = 0.75. All figures are in billions of dollars.

A concerned father wants to stop his young son smoking cigarettes. He decides to make his son smoke five full packets at once to convince him to stop.

1. Explain how the law of diminishing marginal utility will support the father’s plan and that his plan may actually work.
2. In your answer, explain all assumptions that you make and why they are important.
3. Do these assumptions apply to only the father’s plan or to the law of diminishing marginal utility in every situation?

What are the main disadvantages of an increase in income tax, assuming the economy has an output gap?

Consider a perfectly competitve labour market with two groups of workers differing in number and marginal productivity (measured in extra revenue)

In group A there are 40 workers with a marginal productivity of 9

In group B there are 60 workers with a marginal productivity of 5

Before hiring, employers do not know which group workers belong to

What would be the market wage rate? Illustrate with appropriate diagrams