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An economy comprises two consumers, 1 and 2, with two consumption goods bi-cycles (b) and
wheat. Both consumers have the same utility function μ (b,w) = bw
Bi-cycles and wheat
are produced by two firms which use only labour according to the production functions
b = root 1b and w = 0.5 root 1 w
$!l%
Both firms are owned by consumer 1, and consumer 2 owns 200 units of labour.
(a) Find the production possibility frontier for this economy.
(b) Find the competitive equilibrium.
(c) Find competitive equilibrium if every consumer owns 100 units of labour and owns one
firm.
(d) Find the Pareto efficient allocations for this economy.
wheat. Both consumers have the same utility function μ (b,w) = bw
Bi-cycles and wheat
are produced by two firms which use only labour according to the production functions
b = root 1b and w = 0.5 root 1 w
$!l%
Both firms are owned by consumer 1, and consumer 2 owns 200 units of labour.
(a) Find the production possibility frontier for this economy.
(b) Find the competitive equilibrium.
(c) Find competitive equilibrium if every consumer owns 100 units of labour and owns one
firm.
(d) Find the Pareto efficient allocations for this economy.
Economics
(b) Why does the solution occur at a corner point only? Give reasons
The wool industry in Hypothetica is highly competitive with the many woolgrowers seeing themselves as being price takers in an industry with no significant barriers to entry. In order to improve the incomes of woolgrowers, the government of Hypothetica is contemplating subsidising wool production in order to reduce woolgrowers’ costs and thus increase their profits. The government is also considering, as an alternative policy, the provision of funds for the wool industry to improve the marketing of its product and thus to increase the demand for wool.
Using diagrams, show the impact of each of these two policies on a typical firm (i.e. woolgrower) in the wool industry in the long run. (Assume constant costs and also assume that all firms in the industry are initially in long run equilibrium). Will the typical woolgrower be better off in the long run if either policy is implemented?
Using diagrams, show the impact of each of these two policies on a typical firm (i.e. woolgrower) in the wool industry in the long run. (Assume constant costs and also assume that all firms in the industry are initially in long run equilibrium). Will the typical woolgrower be better off in the long run if either policy is implemented?
The wool industry in Hypothetica is highly competitive with the many woolgrowers seeing themselves as being price takers in an industry with no significant barriers to entry. In order to improve the incomes of woolgrowers, the government of Hypothetica is contemplating subsidising wool production in order to reduce woolgrowers’ costs and thus increase their profits. The government is also considering, as an alternative policy, the provision of funds for the wool industry to improve the marketing of its product and thus to increase the demand for wool.
Using diagrams, show the impact of each of these two policies on a typical firm (i.e. woolgrower) in the wool industry in the long run. (Assume constant costs and also assume that all firms in the industry are initially in long run equilibrium). Will the typical woolgrower be better off in the long run if either policy is implemented?
Using diagrams, show the impact of each of these two policies on a typical firm (i.e. woolgrower) in the wool industry in the long run. (Assume constant costs and also assume that all firms in the industry are initially in long run equilibrium). Will the typical woolgrower be better off in the long run if either policy is implemented?
The advent of mobile shopping apps has led to an enormous growth in online shopping, particularly for electronic goods. Explain what effect is the introduction of shopping apps having on:
(a) Competition in the retail market for electronics
(b) The profitability of the traditional brick-and-mortar retailers of electronics
(c) The consumer surplus of purchasers of electronics
(a) Competition in the retail market for electronics
(b) The profitability of the traditional brick-and-mortar retailers of electronics
(c) The consumer surplus of purchasers of electronics
Economics
Production/Cost Exercises
1. The following is a short-run production table for a firm with labor as its only variable input.
Wage = $ 320
Capital = 110
Capital Price= $20
Product Price= $60
Labor Output
0 0
1 50
2 110
3 160
4 200
5 230
6 250
7 260
8 265
9 260
10 250
a. Determine the following measures at all levels of output:
MPL, APL, TFC, TVC, TC, TR, AVC, ATC, AFC, MC, PROFIT
b. At what level of output is the profit maximized?
c. What kind of observations can you make about MC, price, average total cost and profit ?
1. The following is a short-run production table for a firm with labor as its only variable input.
Wage = $ 320
Capital = 110
Capital Price= $20
Product Price= $60
Labor Output
0 0
1 50
2 110
3 160
4 200
5 230
6 250
7 260
8 265
9 260
10 250
a. Determine the following measures at all levels of output:
MPL, APL, TFC, TVC, TC, TR, AVC, ATC, AFC, MC, PROFIT
b. At what level of output is the profit maximized?
c. What kind of observations can you make about MC, price, average total cost and profit ?
A firm has the following short-run production output function
Q = 10L – 0.5L^2
Suppose that the output can be sold for $10 per unit. Further assume that the firm can obtain as much of the variable input (L) as it needs at $20 per unit.
a) Determine the marginal revenue function
b) Determine the value of L that maximizes profits
Q = 10L – 0.5L^2
Suppose that the output can be sold for $10 per unit. Further assume that the firm can obtain as much of the variable input (L) as it needs at $20 per unit.
a) Determine the marginal revenue function
b) Determine the value of L that maximizes profits
Between 2000 and 2013, in how many years was fiscal restraint initiated?
a consumer's utility function is given as U(x,y)= ln( x+2*y-y^2/2) where x and y are two goods of consumption . (a) find indirect utility function of the consumer (b) examine if roy's law is satisfied by the consumer's demand functionfor y. (c) find the expenditure function of the consumer e(p,u) where price of x=1 and price of y=p (d) find the hicksian demand function hy (p,u) for commodity y, where the price of x is 1 and the price of y is p.
Assume that there are four firms supplying a homogenous product. They have identical cost functions given by C (Q) = 40 Q. If the demand curve for the industry is given by µ = 100 – Q, find the equilibrium industry output if the producers are Cournot competitors. What would be the resultant market price? What are the profits of each firm?
