• Baseline Scenario: A consumer has solved the UMP, yielding the 50,000 following demand function: r = A firm has solved the CMP yielding the following total cost function: TC = 40 + q², which results in the following marginal cost function: MC = 80 * q. • New Scenario: A consumer resolves the UMP after experiencing an increase in income, yielding a new demand function: x = 72.000 Equation Description: For a baseline scenario, a consumer has solved the Utility Maximization Problem (UMP) yielding a demand function where quantity demanded equals the product of two terms: the first term is 50,000; and, the second term is price raised to the -1 power. A firm has solved the Cost Minimization Problem (CMP) yielding a total cost function where total cost equals the product of two terms: the first term is 40; and the second term is quantity supplied squared. Given this total cost function, the firm faces a marginal cost function where marginal cost equals 80 times quantity supplied. For a new scenario, firm cost and marginal cost is unchanged. However, a consumer resolves the UMP after experiencing an increase in income, yielding a new demand function where quantity demanded equals the product of two terms: the first term is 72,000; and, the second term is price raised to the -1 power, Question: For the new scenario, and assuming perfect competition what is the equilibrium price? O $500 O S6.000 O $2,000 O $1.200 O $2,400
• Baseline Scenario: A consumer has solved the UMP, yielding the 50,000 following demand function: r = A firm has solved the CMP yielding the following total cost function: TC = 40 + q², which results in the following marginal cost function: MC = 80 * q. • New Scenario: A consumer resolves the UMP after experiencing an increase in income, yielding a new demand function: x = 72.000 Equation Description: For a baseline scenario, a consumer has solved the Utility Maximization Problem (UMP) yielding a demand function where quantity demanded equals the product of two terms: the first term is 50,000; and, the second term is price raised to the -1 power. A firm has solved the Cost Minimization Problem (CMP) yielding a total cost function where total cost equals the product of two terms: the first term is 40; and the second term is quantity supplied squared. Given this total cost function, the firm faces a marginal cost function where marginal cost equals 80 times quantity supplied. For a new scenario, firm cost and marginal cost is unchanged. However, a consumer resolves the UMP after experiencing an increase in income, yielding a new demand function where quantity demanded equals the product of two terms: the first term is 72,000; and, the second term is price raised to the -1 power, Question: For the new scenario, and assuming perfect competition what is the equilibrium price? O $500 O S6.000 O $2,000 O $1.200 O $2,400
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Baseline Scenario:
A consumer has solved the UMP, yielding the
following demand function: r =
50,000
A firm has solved the CMP yielding the following
total cost function: TC = 40 * q², which results in
the following marginal cost function: MC = 80 * q.
New Scenario:
A consumer resolves the UMP after experiencing an
increase in income, yielding a new demand function:
72,000
Equation Description: For a baseline scenario, a consumer has solved the Utility Maximization Problem (UMP) yielding a demand
function where quantity demanded equals the product of two terms: the first term is 50,000; and, the second term is price raised
to the-1 power. A firm has solved the Cost Minimization Problem (CMP) yielding a total cost function where total cost equals the
product of two terms: the first term is 40; and the second term is quantity supplied squared. Given this total cost function, the firm
faces a marginal cost function where marginal cost equals 80 times quantity supplied. For a new scenario, firm cost and marginal
cost is unchanged. However, a consumer resolves the UMP after experiencing an increase in income, yielding a new demand
function where quantity demanded equals the product of two terms: the first term is 72,000; and, the second term is price raised
to the -1 power.
Question: For the new scenario, and assuming perfect competition, what is the equilibrium price?
O S500
O $6,000
O $2,000
O $1.200
O $2.400
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