Find the equilibrium price

Assignment Help Macroeconomics
Reference no: EM13689105

Question 1: Assume you own and operate a small coffee shop located in a busy shopping complex. You sell a range of hot and cold coffees, muffins and sandwiches.

a. Using the concepts of demand and supply substitutability, discuss and attempt to define the market in which your business operates

b. Product differentiation is seen to be an important part of your competitive strategy. Explain what is meant by the term product differentiation, giving examples that could apply to your market.

c. Provide and explain two factors that will affect the demand and supply for the hot coffee. Do these factors make a change in demand and supply? Give reasons for your answer.Question 2

 

Question 2:  Suppose the same firm's cost function is C(q) = 4q2 + 16.

a. Find variable cost, fixed cost, average cost, average variable cost, and average fixed cost. (Hint: Marginal cost is given by MC = 8q).

b. Show AC, MC, AVC on a graph.

c. Find the output that minimizes AC.

d. At what range of prices will the firm produce a positive output.

e. At what range of prices will the firm earn a negative profit?

f. At what range of prices will the firm earn a positive profit?

 

Question 3: Suppose you are given the following information about a particular industry: 

QD = 6500 – 100P             Market demand

QS = 1200P                        Market supply

C(q) = 722 + q2/200           Firm total cost function

MC(q) = 2q/200                 Firm marginal cost function 

Assume that all firms are identical and that the market is characterized by the pure competition. 

  1. Find the equilibrium price, the equilibrium quantity, the output supplied by the firm, and the profit of each firm. 
  1. Would you expect to see entry into or exit from the industry in the long run? Explain. What effect will entry or exit have on market equilibrium? 
  1. What is the lowest price at which each firm would sell its output in the long run? Is profit positive, negative, or zero at this price? Explain. 

 

  1. What is the lowest price at which each firm would sell its output in the short run? Is profit positive, negative, or zero at this price? Explain.

Question 4:  

Suppose the demand and supply curves for good M are as follows: 

QD = 70 - 2P

QS = -10 + 2P where P is price per kg measured in dollars and Q is quantity measured in ‘000kgs 

a.   Sketch the demand and supply curves. 

b.   Determine the equilibrium price and quantity. 

c.   Calculate the value of the consumer and producer surplus at the equilibrium price. 

d.   Explain why governments may introduce a price ceiling. 

e.   Suppose a price ceiling of $15 were to be introduced. Calculate the consumer and producer surplus after its introduction. 

 

f.    Who has benefited from the introduction of the price ceiling?

Question 5: 

Firm 1 and firm 2 are automobile producers. Each has the option of producing either a big or a small car. The payoffs to each of the four possible combinations of choices are as given the following payoffs matrix. Each firm must make its choice without knowing what the other has chosen.

 a.       Does  either firm have a dominant strategy? 

 

b.      There are two Nash equilibrium for this game. Identify them.

Question 6 

Two major networks are competing for viewer ratings in the 8:00 -9:00pm and 9:00-10:00pm slots on a given weeknight. Each has two shows to fill this time period and is juggling its lineup. Each can choose to put its “bigger” show first or to place it second in the 9:00-10:00pm slot. The combination of decisions leads to the following “rating points” results: 

 

 

Network 1

 

Network 2

 

First

Second

First

20, 30

18, 18

Second

15, 15

30, 10

 

a.       Find the Nash equilibria for this game, assuming that both networks make their decisions at the same time. 

b.      If each network is risk - averse and uses a maximin strategy, what will be the resulting equilibrium? 

c.       What will be the equilibrium if Network 1 makes its selection first? If Network 2 goes first? 

 

d.      Suppose the network managers meet to coordinate schedules and Network 1 promises to schedule its big show first. Is this promise credible? What would be the likely outcome?

Question 7 

Bookworm and Easyread are both publishers of popular novels. 

a.   Assume that demand for Bookworm novels is elastic

-  Explain the meaning of the underlined term. 

- Outline one important factor that you feel has helped to determine the size of this own price elasticity. 

-  How would a fall in Bookworm’s price affect their total revenue? 

b.   When the price of Easyread novels increased from $20 to $23, Bookworm’s sales increased from 105,000 to 120,000 novels. Calculate the arc cross price elasticity. Are the two brands of novels close substitutes? Explain. 

 

c.   An increase in average weekly earnings from $290 to $310 caused Bookworm’s sales to increase from 120,000 to 130,000 novels. Calculate and interpret the income elasticity.

Question 8 

The following production function relates to a small firm that incurs fixed costs of $100 and labour costs of $10 per hour. 

Labour Hours (L)        Total Product (Q)

1                                  8

2                                  24

3                                  39

4                                  50

5                                  56

6                                  59

7                                  61

8                                  62

 

a.   For each of the output levels shown above calculate: 

• average and marginal product 

• total variable and total cost 

• average variable, average total and marginal cost 

b.   For the above data, over which output range do we observe diminishing returns?

Reference no: EM13689105

Questions Cloud

What is the maximum angular velocity : A 4.40g coin is placed 12.0cm from the center of a turntable. The coin has static and kinetic coefficients of friction with the turntable surface of µs = 0.900 and µk = 0.430. What is the maximum angular velocity
What is the difference in tension : A massive steel cable drags a 19.0kg block across a horizontal, frictionless surface. What is the difference in tension between the two ends of the cable
What value of capacitance should you choose : Your latest invention is a car alarm that produces sound at a particularly annoying frequency of 3600Hz. What value of capacitance should you choose for your car alarm circuit
At what angle will the dark fringe : Light of wavelength 585nm falls on a slit 0.0655mm wide. At what angle will the dark fringe that is most distant from the central bright fringe occur
Find the equilibrium price : Find the equilibrium price, the equilibrium quantity, the output supplied by the firm, and the profit of each firm.
What is the average power delivered by the engine : A 1300kg sports car accelerates from rest to 85km/h in 6.2s. What is the average power delivered by the engine
Find the maximum height of the mass : A block of mass m is released from rest a height hi on a frictionless inclined plane that makes an angle theta with the horizontal. Find the maximum height of the mass
What was its initial speed : A sled is initially given a shove up a frictionless 26.0 degree incline. It reaches a maximum vertical height 1.45m higher than where it started, What was its initial speed
How far apart are the wires in meters : A wire carrying 425 A to the motor of a commuter train feels an attractive force of 3.8 x 10-3 N/m due to a parallel wire carrying 5.4 A to a headlight. How far apart are the wires in meters

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd