Reference no: EM132410724

Chapter 1

Question 1. State the six principles of economics we learnt in class. Then read case number one, and explain how it illustrate seach of the six principles of economics.

Chapter 3 Demand and supply

Question 2. Read case number two and answer the following questions.
1) What accounts for the fact that before Uber's arrival, there were typically enough taxis available for everyone who wanted one on good weather days, but not enough available on bad weather days? Explain briefly and Illustrate with a demand and supply diagram;
2) How does Uber's surge pricing solve the problem? Do you agree with Kalanick's claim that the price is set to leave as few people as possible without a ride? explain.
3) Use a supply and demand diagram to illustrate how Uber drivers can cause prices to surge by taking coordinated breaks. Why is this strategy unlikely to work in Toronto, a large city with an established fleet of taxis?

Question 3. Answer the questions below, using an article from a newspaper, magazine, or relevant online source that is about a specific market and that indicates a change in price of the product. Remember to attach original source information (URL if online source) to your assignment.
1) Summarize events that may have caused changes in demand and/or supply, describe their effects on price and quality.
2) Draw a demand and supply diagram to illustrate the changes.

Chapter 4 Elasticity

Question 4. Read case number three and answer the following questions.
1) How would you describe the price elasticity of demand for airline flights given the information in this case? Explain.
2) Using the concept of elasticity, explain why airlines would create such great variations in the price of a ticket depending on when it is purchased and the day and time the flight departs.
3) Using the concept of elasticity, explain why airlines have imposed fees on things such as checked bags. Why might they try to hide or disguise fees?
4) Use an elasticity concept to explain under what conditions the airline industry will be able to maintain its high profitability in the future. Explain.

Chapter 5 Efficiency and equity

Question 5. Read case number four and answer the following questions (hint: the total number of concert tickets is fixed, your supply curve should reflect this feature):
1) Use the concepts of consumer surplus and producer surplus to analyze the exchange between Bruce Springsteen and his fans. Draw a diagram to illustrate.
2) Explain how the rise of the Internet has disrupted this exchange.
3) Draw a diagram to show the effect of resellers on the allocation of consumer surplus and producer surplus in the market for concert tickets, assuming all fans buy tickets from internet resellers.
Chapter 6 Government actions in markets

Question 6. In the mid-eighteenth century, the government of New France (modern-day Québec) controlled the price of bread, which was set at a predetermined price above the free market price.

a. Draw a diagram showing the effect of the policy. Did the policy act as a price ceiling or a price floor? Explain why.
b. What kinds of inefficiencies were likely to have arisen when the controlled price of bread was above the market price? Explain in detail.

One year during this period, a poor wheat harvest caused a leftward shift in the supply of bread and therefore an increase in its market price. Montreal bakers found that the controlled price of bread in Montreal was below the market price.

c. Draw a diagram showing the effect of the price control on the market for bread during this one-year period. Did the policy act as a price ceiling or a price floor? Explain why.
d. What kinds of inefficiencies do you think occurred during this period? Explain in detail.

Question 7. In each of the following cases involving taxes, explain:
(i) whether the incidence of the tax falls more heavily on consumers or producers, support your answer with calculations.
(ii) Is the demand curve or supply curve more elastic?
(iii) Calculate the deadweight loss.
a. The government imposes an excise tax on the sale of all university and college textbooks. Before the tax was imposed, 1 million textbooks were sold every year at a price of $50. After the tax is imposed, 600 000 books are sold yearly; students pay $55 per book, $30 of which publishers receive.
b. The government imposes an excise tax on the sale of all airline tickets. Before the tax was imposed, 3 million airline tickets were sold every year at a price of $500. After the tax is imposed, 1.5 million tickets are sold yearly; travellers pay $550 per ticket, $450 of which the airlines receive.
c. The government imposes an excise tax on the sale of all toothbrushes. Before the tax, 2 million toothbrushes were sold every year at a price of $1.50. After the tax is imposed, 800 000 toothbrushes are sold every year; consumers pay $2 per toothbrush, $1.25 of which producers receive.

Chapter 10 Output and Costs

Question 8. Sue's Surfboards hires workers at $500 a week and its total fixed cost is $1,000 a week. The table sets out Sue's Surfboards' total product schedule. Solve the following problems:

Labour              Output

(workers       (surfboards

per week)         per week)

1                  30

2                  70

3                120

4                160

5                190

6                210

7                220

1) Calculate average total cost, average fixed cost, average variable cost, and marginal cost of each output in the table. Plot these points and sketch the short-run average and marginal cost curves. (Hint: short-run average cost curves should include AFC, AVC, and ATC).
2) Illustrate the connection between Sue's AP, MP, AVC, and MC curves using graphs.

Chapter 11 Perfect Competition

Question 9. Pat's Pizza Kitchen is a price taker and the table gives its costs of production. show the steps that you have taken to solve the problems below.

1) Calculate Pat's profit-maximizing output and economic profit if the market price is (i) $14 a pizza, (ii) $12 a pizza, (iii) $10 a pizza.
2) What is Pat's shutdown price and what is Pat's economic profit if it shuts down temporarily?
3) Derive Pat's supply curve.

Question 10. The market for paper is perfectly competitive and there are 1,000 identical firms that produce paper. The first table sets out the market demand schedule for paper. The second table sets out the costs of each producer of paper.
1) Calculate the market price, the market output, the quantity produced by each firm, and the firm's economic profit or loss.
2) In the long run, what is the market price and the quantity of paper produced? What is the number of firms in the market?

Chapter 12 and 13, Monopoly and Monopolistic Competition

Question 11. Minnie's Mineral Springs is a single-price monopoly. Columns 1 and 2 of the table set out the market demand schedule for Minnie's water and columns 2 and 3 set out Minnie's total cost schedule.

1) Calculate and tabulate Minnie's marginal revenue schedule and draw a graph of the market demand curve and Minnie's marginal revenue curve. Explain why Minnie's marginal revenue is less than the price.
2) Calculate Minnie's profit-maximizing output, price and economic profit.
3) If Minnie's Mineral Springs is a monopolistic competitive firm instead, what happens to the demand for its products in the long run? What happens to Minnie's economic profit in the long run? Does Minnie have excess capacity in the long run?

Chapter 14 Oligopoly

Question 12. Soapy Inc. and Suddies Inc., the only soap-powder producers, collude and agree to share the market equally. If neither firm cheats, each makes $1 million profit. If one firm cheats, it makes $1.5 million, while the complier incurs a loss of $0.5 million. If both cheat, they break even. Neither firm can monitor the other's actions.
1) Construct the payoff matrix for this game.
2) If this game is played once only, what is the equilibrium?
3) Compare this game to the prisoner's dilemma. Are the games similar or different? Explain.

Attachment:- Demand and supply.rar