Question

- The demand function for Internet cameras is given by
*P**X**=60-X*. The marginal cost curve is MC = 10. Assume that there is a**competitive equilibrium**in the market currently.

- Find the equilibrium price and quantity in the market.
- Calculate consumers’ surplus.
- Calculate the producers’ surplus (profit).
- Draw the supply and demand curve (on the same plane). On it, mark the equilibrium price and quantity, consumers’ surplus (mark the area) and producers’ surplus (mark the area).
- Is the outcome Pareto Efficient? Explain.
- Does the outcome maximize utility in the Bentham’s sense?

Answer #1

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The market for wine has many competitive producers and two types
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In this exercise, the wineries are not able to charge
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800 − 50p. For each firm that produces the good the total cost
function is TC(Q) = 4Q+( Q2/2) . Recall that this means
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The market demand curve is P = 90 − 2Q, and each firm’s total
cost function is
C = 100 + 2q2.
Suppose there is only one firm in the market. Find the
market
price, quantity, and the firm’s profit.
Show the equilibrium on a diagram, depicting the demand function
D (with the vertical and horizontal intercepts), the marginal
revenue function MR, and the marginal cost function MC. On the same
diagram, mark the optimal price P, the quantity Q,...

Given:
X
TUx MUx
MUx/Px
Y
TUy MUy
MUy/Py
MUy/Py’
0
0
0
0
0
0
0
0
0
1
250
1
350
2
450
2 550
3
600
3 700
4
700
4 800
5
775
5 875
6
800
6 900
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utility minus total expenditures...

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QD=100-5P and the market supply curve is given by
QS=5P
a. What are the equilibrium price and quantity?
b. At the market equilibrium, what is the price elasticity of
demand?
Suppose government sets the price at $15 to benefit the
producers.
What is the quantity demanded?
What is the quantity supplied?
What is the amount of the surplus?
Suppose market demand increases to Qd=200-5P.
What is the new equilibrium...

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M=9Px−2Px2.
a) Write out the budget constraint and solve for the MRS.
b) Derive the individual demand for good x. (Hint: you need to
use the optimality condition)
c) Is x an ordinary good? Why or why not?
d) Suppose there are 15 consumers in the market for x. They all
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The demand for skateboards in Vermillion is Q = 500−2P and the
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(a) Graph the supply and demand curves and calculate the
consumer and producer surplus that would exist if there were no tax
in the market.
(b) Show how the tax will change the market equilibrium price
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(b) (6 points) Show the equilibrium on a diagram, depicting the
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Given the products below and the events that affect them,
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changes graphically.
(a)Home heating oil. There is a severe winter in the regions
using the oil; the cost of a barrel of oil rises for producers of
home heating oil.
(b)Organic foods. People become more concerned about chemical
additives in food; traditional...

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