2. Consider a perfectly competitive market for anchovies. The demand curve is given byQD = 72 – 2PD and the supply curve is given by Qs = 3Ps – 3.a) Find the equilibrium price and quantity traded in this market. What does 'equilibrium'mean here? How would a price floor of $10 per unit have changed the quantity tradedand why?b) Sketch the supply and demand curves (on the usual axes) and mark the equilibriumpoint. Calculate the amount of consumer and producer surplus in equilibrium (pleaseremember to include the appropriate units of measurement for your answer).

Answered: Image /qna-images/answer/5219e631-557a-47b6-be47-c0b83ef9ff26.jpg

Answered: 2. Consider a perfectly competitive…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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10. Assume there are 100 bee keepers raising honeybees in North Carolina. Each bee keeper has a supply curve of qs = P/2 - 1, where quantity is measured in thousands of jars of honey. Assume market demand for honey can be represented by QD = 20 - 10P. a. What will be the price and quantity in the market? Draw a supply and demand diagram and indicate the equilibrium price and quantity while making sure to label your axes and intercepts. Now assume that each jar of honey produced generates $2 of benefit to society from the honeybees pollinating the crops and flowers at nearby farms. b. Label the MSC, MSB, MPC, and MPB curves in this market on your diagram from part (a). Calculate and label the efficient quantity of honey in the market. Does the market over-produce or under- produce? I c. Explain why it might be a good idea for the government to intervene in this market. What would be an optimal policy for them to enact and why? MacBook Air
Consider the market for bicycles in the fictional province of Westvale. The market demand function for bicycles is given by P=300-2Q. The marginal cost curve for firms in this market is given by P=40+Q. Prices are measured in dollars. a) Under a competitive market equilibrium, what is the price of a bicycle? b) How many bicycles are produced under a competitive market equilibrium? c) Calculate consumer surplus, producer surplus, and total surplus under the competitive market equilibrium Suppose that the firms that were once competing in this market merge into one single firm, forming a monopoly. This monopoly has a marginal revenue function of P=300-4Q. d) What price does this monopolist charge? e) How many bicycles does the monopolist produce? f) Calculate consumer surplus, producer surplus, and total surplus under the monopolistic market outcome g) How much deadweight loss resulted from the creation of the monopolist?
Suppose the market for pizzas in the U.S. is perfectly competitive and is characterized by the following demand and supply equations (Q = quantity and P = Price): Demand for pizza: Qd = 100 – P Supply of pizza: Qs = 2P − 50 A) Find the market clearing equilibrium price P* and quantity Q*. B) Find the the consumer surplus and producer surplus at the equilibrium. C) Suppose that the U.S. imposes a price ceiling at $40. What is the quantity demanded by consumer (Qd’)? What is the quantity supplied by suppliers (Qs’)? D) Suppose that the U.S. imposes a price ceiling of $40. Is there a shortage or surplus for pizzas? E) Suppose that the U.S. imposes a price ceiling of $40. What is the new CS’ and PS’? Assuming that the government purchases/provides the surplus/shortage. Under the same assumption, what is the deadweight loss caused by the price floor?
A2)
1. The inverse supply equation for clay pots is P = 0.5QS + 1; the inverse demand equation is P = –2QD + 15. Quantity is in thousands of units. What is the normal supply equation, the normal demand equation, and the resulting equilibrium price and quantity?
d) What will be the deadweight loss? e) What will be the firm’s maximum profits? f) How much would the firm would save in additional costs, if it had decided to supply all of that output at the point of equilibrium?
Analytical Questions 1) Suppose that the demand for oranges increases. Explain the long-run effects of the guiding function of price in this scenario. 2) Suppose that the demand for oranges increases. Carefully explain how the rationing function of price will restore market equilibrium. 3) For each of the following changes, show the effect on the demand curve and state what will happen to market equilibrium price and quantity in the short run. a.Consumers expect that the price of the good will be higher in the future. b.The price of a substitute good rises. c.Consumer incomes fall, and the good is normal. d.Consumer incomes fall, and the good is inferior. e.A medical report is published showing that this good is hazardous to your health. f.The price of the good rises. 4) For each of the following changes, show the effect on the supply curve and state what will happen to market equilibrium price and quantity in the short run. a.The government requires pollution…
30. Consider a market in which there are 100 cap makers, each with an individual supply curve given by q =p and 1000 cap consumers, each with an individual demand curve given by q = 4.4 – 0.01lp, where p is the price and q is the quantity. The equilibrium price is (а) 40 (b) 50 (c) 16 (d) 24 (e) 30
Consider a competitive market with a downward sloping demand curve and an upward sloping supply curve. If supply increases, the market price ✓ and the market quantity If demand increases, the market price If both supply and demand increase, the market price quantity ✓and the market quantity ✓ and the market
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