9. Market erriciency and market failure Suppose that the following graph shows a free market equilibrium, with QE as the equilibrium quantity. PRICE * QUANTITY For an output level above Qg, the value of a unit to a buyer is Supply Demand ? the cost of a unit to a seller. Suppose a firm that produces for this market is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents, who have no business with the company. This scenario is characterized by which is an example of 7

9. Market erriciency and market failure Suppose that the following graph shows a free market equilibrium, with QE as the equilibrium quantity. PRICE * QUANTITY For an output level above Qg, the value of a unit to a buyer is Supply Demand ? the cost of a unit to a seller. Suppose a firm that produces for this market is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents, who have no business with the company. This scenario is characterized by which is an example of 7

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose production is reduced by 60 percent for each of the suppliers in this industry. Draw a new market curve and answer the following questions based on your new supply curve and the original demand curve. In Table 3.1, the equilibrium market quantity would be Table 3,3 Individual Demand and Supply Schedules. Quantity Demanded By: Price 4.00 Ali Kelly Jessie Market 4 1 3.00 8 2.00 12 1.00 16 3.00 10 2.00 5 1.00 0 17 units Quantity Supplied by: Price Andy Maria Jose Market 4.00 15 15 11 9 7 5 12 units 25 units 9746 10 units 2 1234 11 7 3
Price 0 52 * S" Quantity Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and 52 (point E). If the technology to produce motorcycles improves and the number of buyers increases, how will the equilibrium point change? O The equilibrium point will move from E to B. O The equilibrium point will move from E to C. The equilibrium point will move from E to A. The equilibrium point will remain at E.
4) Suppose a market starts in equilibrium; then we observe a decrease in supply and a decrease in demand simultaneously. What can we say about the new equilibrium? Illustrate.
Suppose you discover a stream in northern Minnesota whose water has amazing powers for healing. You decide to sell bottles of the water. The market demand curve is linear and is given as follows: P = 30 - Q The marginal cost to produce this amazing water is $3 per bottle. a. In a competitive market, what price would this water sell for and how much would you sell? Show your calculations. P = _____, Q = ______ b. After taking this class, you realize that you have monopoly power in this market. To maximize your profits, what quantity would you sell and what would the price per bottle be? (Hint: what is marginal revenue for a monopolist?) Show your calculations. Pm = ____, Qm = ____ c. Now draw a graph to the right with price on the vertical axis and quantity on the horizontal axis and show the competitive market solution and the monopoly output and prices.
1. Characteristics of competitive markets The model of competitive markets relies on these three core assumptions: 1. There must be many buyers and sellers-a few players can't dominate the market. 2. Firms must produce an identical product-buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry. Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Scenario There are hundreds of colleges that serve millions of students each year. The colleges vary by location, size, and educational quality, which enables students with diverse preferences to find schools that match…
4. Profit maximization in the cost-curve diagram Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point.
Qustion 15: Suppose that we are considering the market for a good that is a Giffen Good. We are thinking about a world of Supply and Demand. Very importantly, the demand curve is more inelastic than the supply curve. Suppose that the price of capital increases, and production of the good gets more expensive. What would we expect to happen to the market price and quantity (p* and Q*)? [Hint: this is a supply and demand question, not a question about the cost curves. I would suggest drawing it out.] A. Price will increase. Quantity will increase. B. Price will increase. Quantity will decrease. C. Price will decrease. Quantity will increase. D. Price will decrease. Quantity will decrease. Price Quantity
17. August and François are the only sellers of sparkling water at a market in a small, rural French town. They obtain their sparkling water for free from wells in their backyards and transport it to the market in wheelbarrows; neither has access to motorized transportation. Identify the type of
s) In one graph, show what would happen to the market price and quantity for lemons, which can be produced from the same resources as bananas, as a result of the new findings above bananas.
1. Consider two companies involved in the supply chain: a retailer who faces customer demand and a manufacturer who produces and sells ski jackets to the retailer. It costs the manufacturer $30 to manufacture and ship each ski jacket. The retailer plans to sell the ski jacket for $300. At this price, demand for the ski jackets is estimated to be 10000 units with a 20 percent chance of happening, 9000 units with a 40 percent chance of happening, and 8000 units with a 40 percent chance of happening. Any ski jacket not sold during the ski season is sold to a discount store for $20. We refer to this value as the salvage value. Both the manufacturer and the retailer can sell the ski jackets they still have on hand after season for this salvage value. (a) Suppose the manufacturer sells to the retailer at $80/unit. How many ski jackets should the retailer order? How much profit does the retailer expect to make as a result? How much profit will the manufacturer make as a result? (b)What is the…
PLEASE SUBMIT AN IMAGE OF THE REQUESTED ILLUSTRATION DISCUSSED BELOW. (PLEASE MAKE SURE YOU LABEL ALL APPROPRIATE COMPONENTS AND USE CORRECT NUMERICAL SCALES FOR YOUR GRAPH). The table below illustrates the linear supply and demand curves for the high-end electric car market in Yakima. Now, if we assume the market for electric cars in Yakima is an efficient market, please illustrate (graph) this market and label the resulting functions and surpluses (yes, do not forget about labeling the surpluses) Quantity Supplied (In units) 0 40 80 120 160 200 240 Price $0.00 $15,000.00 $30,000.00 $45,000.00 $60,000.00 $75,000.00 $90,000.00 Quantity Demanded (In units) 480 400 320 240 160 80 0
1. Suppose you are the economic adviser of a company producing three brands of mobile phones; Nokia 10, Samsung X and iPhone Z. Suppose further that, your company currently sells 120 Units of iPhone Z at ¢800 per unit, 150 units of Samsung X at ¢800 per unit and 200 units of Nokia 10 at ¢100 per unit, but in a bid to maximize profit, the company’s managing director proposes an increase in price of Samsung X from ¢800 to ¢1000 per unit for which quantity demanded is anticipated to fall from 150 to 100 units; iPhone Z from ¢800 to ¢1200 per unit for which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from ¢100 to ¢200 per unit for which quantity demanded is expected to fall from 200 to 100 units. I. Using the mid-point formula, compute the price elasticity of demand for each brand. II. From your answer in i, what is the type and economic interpretation of each brand’s value of elasticity