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General Equilibrium

Perfectly Competitive Market Problem

In the perfectly competitive market for orange juice concentrate the current market price is $2.19 per gallon. a. A firm will maximize profits when its Marginal Costs per gallon are $__ b. Favorable conditions produce a record high harvest yield. We would expect the short-term market price per gallon to ___. c. An unexp

Game Theory and Asymmetric Information

1. a. You and a competing firm are the only sellers of a new product. You are engaged in an intense battle for initial market share. You both realize that the one who captures most of the market share will be the one who spends the most on advertising and promotion. You are the marketing manager and you have up to $1 million fo

Equilibrium Parameters: Price and Quantity

a. Initially, the peanut market is perfectly competitive, and each firm has minimum average cost equal to 5 (remember, MC = AC at minimum AC). Find the competitive price and quantity. b. One firm buys all of the other peanut firms, obtaining a monopoly in the peanut industry. The monopoly has constant returns to scale and

Demand and Supply in Competitive Markets

The market for hog hats is competitive and demand is given by P=75-Q while supply is given by P=15+2Q. What are the equilibrium price and quantity in this market? Calculate the elasticity of demand at a price of 50. Give an economic interpretation to your answer. Is demand elastic, unit elastic or inelastic at this price?

Solving for Optimal Combination of Inputs

The Largo Publishing House uses 400 printers and 200 printing presses to produce books. A printer's wage rate is $20, and the price of a printing press is $5,000. The last printer added 20 books to total output, while the last press added 1,000 books to total output. Is the publishing house making the optimal input choice? Why o

Describe a situation where prices have been held out of equilibrium due to government intervention in the market-the obvious ones discussed in the text are rent control and agricultural subsidies. You may use a specific example of one of these, or any other example. b. Were there any unintended consequences in your example?

a. Describe a situation where prices have been held out of equilibrium due to government intervention in the market-the obvious ones discussed in the text are rent control and agricultural subsidies. You may use a specific example of one of these, or any other example. b. Were there any unintended consequences in your examp

Equilibrium Level of Income or GDP

Assume that the consumption schedule for a private open economy is such that consumption C=50+0.8Y. Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig=30 and Xn=10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditu

Understanding Equilibrium

Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.8Y. Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 30 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate ex

ATC is examined.

A firm in a purely competitive industry is currently producing 1000 units per day at a total cost of $450. If the firm produced 800 units per day, its total cost would be $300, and if it produced 500 units per day, its total cost would be $275. What are the firm's ATC per unit at these three levels of production? If every firm

Average Total Cost

A firm in a purely competitive industry is currently producing 1000 units per day at a total cost of $450. If the firm produced 800 units per day, its total cost would be $300, and if it produced 500 units per day, its total cost would be $275. What are the firm's ATC per unit at these three levels of production? If every firm i

Oligopoly and payoff table

Two oligopoly firms are in the process of evaluating their marketing strategies. Firm 1 can generate estimated profits of $10 million from strategy A if the second firm reacts by strategy C, and $15 million from strategy A if the second firm reacts with strategy D. On the other hand, Firm 1 may follow strategy B which could retu

ATC

A firm in purely competitive industry is currently producing 1200 units per day at a total cost of $600. If the firm produced 1000 units per day, its total cost would be $400, and if it produced 700 unit per day, its total cost would be $375. What is the firm's ATC per unit at these three levels of production? If every firm in t

Calculating a competitive industry's long-run equilibrium

A firm in a purely competitive industry is currently producing 1200 units per day at a total cost of $600 . If the firm purchased 1000 units per day, its total cost would be $400, and if it produced 700 units per day, its total cost would be $375. What is the firms ATC per unit at these three levels of production? If every firm

National income and expenditure components

The national income and expenditure components for each level of the economy of Lala Land are given below. What is the total expenditure at each level of income? What is the equilibrium level of GDP? What is the marginal propensity to consume? Using the multiplier, if consumer spending autonomously increases by $200,

Calculate Demand-Side Equilibrium

DEMAND SIDE EQUILIBRIUM ACTIVITY 1. From the following data, find the marginal propensity to consume, compute the expenditure at each level of GDP, and find the equilibrium GDP: GDP C I G X IM 5,000 3,650 1,000 1,200 700 1,100 5,500 4,000 1,000 1,200 700 1,100 6,000 4,350 1,000 1,200 700

Management decisions for a perfectly competitive firm

1. Should a perfectly competitive firm making a loss in the short-run always leave the market? Why or why not? What about in the long-run? 2. Should a perfectly competitive firm advertise in an effort to increase its sales and its profits? Why or why not? 3. Can you think of an example of a perfectly competitive firm? Wh

third-party-payer system on equilibrium price and quantity

Explain the effect of a third-party-payer system on equilibrium price and quantity. I have a neighbor who had bi-pass surgery that cost us all $150,000 and he was 90 years old. This is a 3rd party example where he only has a few years left but was not able to pay to have the surgery done but we taxpayers paid it. Explain if this

Monopoly Versus Competitive Market Equilibrium

During recent years, MicroChips corp has enjoyed substantial economic profits derived from patents covering a wide rang of inventions and innovations for microprocessors used in high-performance desktop computers. A recent introduction, the Penultimate, has proven especially profitable. Market demand and marginal revenue relatio

Find Cape Despair's new equilibrium levels of real GDP and productivity.

In the economy of Cape Despair, the subsistence real wage rate is $15 an hour. Whenever real GDP per hour rises above $15 the population grows, and whenever the GDP per hour of labor falls below this level, the population falls. The table shows Cape Despair's production function: Labor Real GDP (bil

Characterize equilibria in this case.

in the country of less developed, conventional telephones are frequently breaking down or overloaded, and it takes months to get a new line installed. Companies are thinking of adopting new parallel wireless system offered by private company, which for now can poorly and sporadically interconnect with local conventional phones,

Consider the following events: Scientists reveal that consume

Consider the following events: Scientists reveal that consumption of oranges decreases the risk of diabetes and , at the same time, farmers use a new fertilizer that makes orange trees more productive. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.

An Upward Sloping Supply Curve

If the supply curve of savings is upward sloping, a comprehensive wealth tax will: a. increase the market rate of interest. b. reduce the market rate of interest. c. have zero excess burden. d. have no effect on investment

Market Analysis is achieved.

Q1) Market Analysis: Suppose that demand for oranges is given by the following Equations: Q= -200P + 1000 With quantity (Q) measured in oranges per day and price (P) measured in dollars per orange. The supply curve is given by Q= 800P A. Compute the equilibrium price and quantity of oranges. B. Suppose that an excise ta

Game Theory: Inside Oligopoly

In a two play, one shot simultaneous-move game each player can choose strategy A, each earns a payoff of $500. If both players choose strategy A, each ears a payoff of $500. If both players choose strategy B, each earns a payoff of $100. If player 1 chooses strategy A and player 2 chooses strategy b, then player 1 earns $0 and p

Profit maximization by corner gas stations.

The Hull Petroleum Company and Inverted V are retail gasoline franchises that compete in a local market to sell gasoline to consumers. Hull and Inverted V are located across the street from each other an can observe the prices posted on each other's marquees. Demand for gasoline in this market is Q=50-10P, and both franchises

Applied Problem

Florida Citrus Mutual, an agricultural cooperative association for citrus growers in Florida, needs to predict what will happen to the price and output of Florida oranges under the conditions below. What are you predictions? For each part, sketch a graph showing the appropriate demand and supply analysis. A. A major freeze dest

Labor-Leisure Constraint Calculation

Suppose Madison has 16 hours in the day for work or leisure. She earns $5 an hour and receives $15 each day in non-labor income. Draw her labor-leisure constraint. Also, suppose Madison maximizes her utility by working 8 hours a day. Solve for the amount of leisure consumed and the amount of income earned. Indicate these equili