Reference no: EM13862053
1. Using simple supply and demand diagrams, illustrate the expected changes in the market for first-class air travel in the US. Indicate how price and quantity would be affected in each case (increase, decrease, or indeterminate).
a. The price of oil triples, and the US economy suffers a major recession.
b. There is a major consolidation in the industry, leaving only one national airline.
c. Larger, more efficient planes are introduced. At the same time, there is an increase in taxes on airline tickets.
2. A haunted house attraction estimates its daily demand as
Q = 400 - 2P -10Py + 0.021,
where Py is the price of a corn maze down the road (Pr$10), and I is the area average monthly income (1=1,500).
a. Find the attraction's market demand function in terms of P and Q.
b. If the attractions current admission price is P = $15, how many tickets should they expect to sell each day?
c. What is the attraction's own-price elasticity of demand?
d. What is the economic relationship and cross elasticity between the haunted house and the maze?
e. If area incomes fall by 10%, by how much would ticket sales change? What type of good does that make the haunted house? (No need to convert time frame)
f. If the marginal cost of providing haunted house tours is $1, is the current $15 price profit-maximizing? If not, should it be raised or lowered?
3. A circuit board producer can use either high-skilled labor (H) or middle-skilled labor (M), or a combination of them to produce its product. It has the following production function:
Q = 8H + 2.5M
a. What is the marginal product of high-skilled labor?
b. What is the marginal product of middle-skilled labor?
c. If high-skilled labor costs $35 per hour, middle-skilled labor costs $10 per hour, and the finn needs to produce 2000 circuit boards, how many hours of each labor type should it use?
d. If middle-skilled labor remains at $10/hr, at what price would high-skilled labor have to be for the firm to be indifferent to the type of labor it used?
A knock-off handbag producer has weekly average variable costs of
AVC 500 - 4Q + 0.025Q2
a. What is the firm's marginal cost?
b. What is the minimum quantity per week the firm will produce before shutting-down in the short run?
c. What is the price below which the firm will shutdown immediately?
5. A touch-screen manufacturer has a total cost function of
TC = 1000 +4Q + 0.2Q2
and a demand function of
Q = 400 - 2.5P
a. If it charges all customers the same price, what is its profit-maximizing output level?
b. What is its profit-maximizing price?
c. What is the amount of profit?
d. If the firm's product becomes a commodity and it has to accept the market price of $60, what will its new profit level be? (round Q to the nearest integer)
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: Illustrate the expected changes in the market for first-class air travel in the US and what type of good does that make the haunted house - What is the marginal product of high-skilled labor?
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