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# Demand & Supply

### The profit maximization chapter in Nicholson is explained.

1. John's Lawn Mowing Service is a small business that acts as a price taker (MR = P). The prevailing market price of lawn mowing is \$20 per acre. John's costs are given by total cost = .1q^2 + 10q + 50 where q = the number of acres John chooses to cut a day a. How many acres should John choose to cut in order to maximi

### Equilibrium price and consumer surplus

1) In a competitive market, the market demand is Qd=48 - 5p and the market supply is Qs = 7P. The equilibrium price is 4 8 9.6 it elastic 2) In a competitive market, the market demand is Qd=480 - 5p is the market price is 52, what is the consumer surplus? 220 96 4840 9680

### Profit maximization with given demand and cost schedule

Firm has the following demand and cost schedule for a particular product: Q=200-5p TC=400+4Q a) At what price should this firm sell ist product? b) If this is a monopolistically competiive market, what do you thingk will start happening in th elong rung? Explain c) Suppose in the long-run, the demand shiffted to Q=1

### Calculating price and elasticity of demand

Suppose that your demand schedule for cell phone applications is as follows: Quantity Demanded per Year Quantity Demanded per Year Price per Application (income = \$40,000 per year) (income = \$50,000 per year) \$ 2

### Effects of a price floor

This question states: h) Facing budget problems, Congress wants people who use national parks to pay more of their share for park maintenance. This is done by imposing a price floor. What would happen if the price floor is \$4 above the equilibrium price? I'm including a graph so the answer can be graphed out, as well as, def

### Managerial Economics

The recent recession has hurt several industries due to a decline in demand by households. Think of the relationship between income and demand and discuss the following questions: 1. What are "normal" goods? Give an example in our current economy. 2. What are "inferior" goods? Give an example in our current economy.

### Supply and demand

Consider what your firm produces( tools ). What are some things that would change the demand for your product? What are some things that would affect changes in supply? How can quantity demanded be changed? What if the government raised the minimum wage. How would this policy effect your firm?

### Competition and pricing

How does competition affect profits and prices? What causes some firms to enter an industry, and others to leave it? What are the effects on profits and prices of new firms entering and old firms leaving?

### 2 Multi-Choice Economic Problems If a price increase from \$5 to \$7 causes quantity demanded to fall from 250 to 100, what is the absolute value of the own-price elasticity at a price of \$7? A)1.75. B) 5.25. C) 0.19. D) 2.15. Mitchell's money income is \$150, the price of X is \$2, and the price of Y is \$2. Given these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J Mitchell's MRS is 2. Given these prices and income, what is Mitchell's equilibrium consumption of X? A) X < 50. B) X = 50. C) X > 50. D) X = Y.

If a price increase from \$5 to \$7 causes quantity demanded to fall from 250 to 100, what is the absolute value of the own-price elasticity at a price of \$7? A)1.75. B) 5.25. C) 0.19. D) 2.15. Mitchell's money income is \$150, the price of X is \$2, and the price of Y is \$2. Given these prices and income, Mitchell buys 50

### Application of Price Elasticity of Demand

The Haas Corporation's executive vice president circulates a memo to the firm's top management in which he argues for a reduction in the price of the firms product. He says such a price cut will increase the firms sales and profits. A) The firms marketing manager responds with a memo pointing out that the price elasticity of

### Arc approzimation formula

Problem-solving exercises: (a) Use the arc-approximation formula to calculate the price-elasticity of demand coefficient of a firm's product demand between the (quantity, price) points of (100, \$20) and (300, \$10).

### Externalities and Alternative Fuels in the U.S.

Identify any externalities associated with initiatives to develop alternative fuels in the United States. How do these externalities affect the market outcome? Is it possible for a government's solution to a market failure to actually worsen the failure?

### Applications of the Price Elasticities

1.- The price elasticity of demand for imported whiskey is estimated to be -0.20 over a wide interval of prices. The federal government decides to raise the import tariff on foreign whiskey, causing its price to rise by 20%. Will sales of whiskey rise or fall, and by what percentage amount? 2.- In an article about the fina

### Fundamentals of Microeconomics

Analyze the basis for the trends in consumption patterns, as discussed in any article. Consider the utility derived from the products mentioned in the article. Describe what has occurred to change the demand for, or the supply of, the products, and market prices of those products. .

### Managerial Economics

A television station is considering the sale of promotional DVDs. It can have he DVDs produced by one of two suppliers. Supplier A will charge the station a set up fee of \$1,200 plus \$2 for each DVDs; Supplier B has no set up fee and will charge \$4 per DVD. The station estimates its demand for the DVDs to be given by Q= 1,600

Suppose your firm competes against another firm for customers. You and your rival know your products will be obsolete at the end of the year and must simultaneously determine whether or not to advertise. In your industry, advertising does not increase total industry demand but instead induces customers to switch among the produc

### The change in the quantity of product A demanded

The change in the quantity of product A demanded in any given week is inversely proportional to the change in sales of product B in the previous week. That is, if sales of B rose by X percent last week, sales of A can be expected to fall by X percent this week. A. Write the equation for next week's sales of A, using the symbo

### Derived Demand

I need help understand What does it mean to say that the demand for resources is a derived demand? Is the demand for all goods and services a derived demand?

### Taxes, MPB, MSB a. Calculate the equilibrium price and quantity (million packs/year) before the tax is imposed. In the figure from our notes, this is where MSC = MPB. b. Using the conditions above, calculate Pb and Ps after the tax is imposed. What portion of the 0.50 tax are consumers paying? What portion of the tax are producers paying? c. Using either Demand or Supply from above, determine the total quantity (packs of cigarettes) produced and consumed after the tax is imposed. d. Using the arc elasticity formula, calculate the price elasticity of demand over this part of the demand curve (i.e. P0 and P1 in the figure). e. What is the amount of tax revenue per year raised by government from the imposition of the per-unit tax? f. The cost to consumers and producers, however, will be more than the taxes paid for cigarette production and consumption. That is, even though government has decided that before the tax there was overconsumption, after the tax both producers and consumers lose out on producer and consumer surplus, respectively. What is the deadweight loss from the tax? g. How would society (all individuals) know that this tax is beneficial? Explain.

Suppose the federal government (back in 1985?) decided to encourage an efficient amount of cigarette consumption by imposing a per-unit tax of \$0.50, on cigarette manufacturers equal to the vertical distance between MPB and MSB at Q1 as shown in the figure given. We can use linear demand and supply curves to calculate the effect

### Profit contribution and elasticity concepts

Angelica pickles manager a Quick copy franchise White Plains, New York. Pickles projects reducing copy 5¢ to 4¢ each, Quick Copy's \$600-per-week profit contribution will increase by one-third. A. If average variable costs are 2¢ per copy, calculate Quick Copy's projected increase in volume. B. What is Pickles' estimate

### market economy and market surplus

Please provide assistance: 1). Explain how a market economy compensates for a market surplus. What about a market shortage? How does the relate to laissez-faire. Explain how the market system works to answer the four fundamental economic questions. What are some factors that may cause the market system to not function effect

### Supply/demand curve

1. Find a product (possibly a commodity) traded in the global market and examine how the price of the product has changed over the past 10 years. How have these price changes reflected the law of supply and demand? Be sure to discuss both movement along the supply/demand curve as well as shifts in the curves. (A graph in excel,

### Forecasting Techniques

Consider a price-taking firm in the competitive industry for raw chocolate. The market demand and supply functions for raw chocolate are estimated to be Chocolate demand: Q = 10,000-10,000P+2M Chocolate supply: Q = 40,000 + 10,000P- 4,000PI Where Q is the number of 10 pound bars per month, P is the price of a 10 pound b

### Demand Curve Analysis

Demand Curve Analysis. Papa's Pizza, Ltd., provides delivery and carryout service to the city of South Bend, Indiana. An analysis of the daily demand for pizzas has revealed the following demand relation: Q = 1,400 ï?­ 100P ï?­ 2PS + 0.01CSP + 750S where Q is the quantity measured by the number of pizzas per day, P is

### Monopolistic competition guides

1. One major reason predictions that population growth would outrip the economy's capacity to support a population turned out to be false is that (a) the supply of resources increaed faster than the dmand for them (B) the demand for resources increased faster than the supply of them (c) the population growht rate slowed and s

### Analyzing Demand and Supply Curves: Example Problem

Let supply be given by P=5Q and demand by P=19-2Q. A) What would be the equilibrium quantity and equilibrium price? B) Suppose the Government imposes a \$5 per unit tax on the seller, which equation would be affected and how? C) What would be the new equilibrium quantity and price?

### Determine the implied price elasticity of demand

When the British government tripled university fees for foreign students in Great Britain, about one-half of them left to study in other countries a) What is the implied price elasticity of demand by foreigners for a British education is (in absolute value), explain b) What do you think happened to university revenues from f

### Managerial Economics

Suppose that the supply schedule of Maine lobsters is as follows: Price of lobster Quantity of lobster supplied (per pound) (pounds) \$25 800 20 700 15

### Managerial Economics Supply and Demand

1. Office building maintenance plans call for the stripping, waxing, and buffing of ceramic floor tiles. This work is contracted out to office maintenance firms, and both technology and labor requirements are very basic. Supply and demand conditions in this perfectly competitive service market in New York are: QS = 2P - 20 (S

### Production possibilities

Below is a production possibilities table for consumer goods (automobiles) and capital goods (forklifts) PRODUCTION ALTERNATIVES TYPE OF PRODUCTION A B C D E Automobiles