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Marginal Revenue

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8) A major source of chicken feed in the United States is anchovies, small fish that can be scooped up out of the ocean at low cost. Every 7 years the anchovies disapper to spawn and producers mut turnto grain, which is more expensive, to feed their chickens. What is likely to happen to the cost of chicken when the anchioves disapper? Whatare subsitutes for chicken? How are the markets for these substitues affected? Name some complements to chicken. How are the markets for these complements affected? How might the allocation of farmland be changed as a result of the disappearence of anchioves?

9) Suppose two passsengers both end up with a reservation for the last seat on a train from San Francisco to Los Angeles. Two alternatives are proposed. Compare the two from the standpoint of efficiency and equity.

a) Toss a coin

b) Sell the ticket to the highest bidder

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Marginal Revenue is examined.

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8) A major source of chicken feed in the United States is anchovies, small fish that can be scooped up out of the ocean at low cost. Every 7 years the anchovies disappear to spawn and producers must turn to grain, which is more expensive, to feed their chickens.

What is likely to happen to the cost of chicken when the anchovies disappear?

If the anchovies disappear this would lead the producers to turn to grain which increase the overall production costs. Of course this would also increase the price of chicken in the market. The demand of chicken and its complementary products will increase. On the other hand the demand of cheaper substitute products would increase. When
the anchovies appear again, this time everything would be opposite.

What are the substitutes ...

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Umut Oltulu, MBA
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  • MBA, Texas A&M University-Kingsville
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