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- Bill is considering opening a new bookstore near the university campus. There are two possible sites under consideration. One is relatively small, while the other is large. If he opens at small site and demand is good, he will generate a profit of $60,000. If demand is low, he will lose $20,000. If he opens at large site and demand is high he will generate a profit of $90,000, but he will lose $40,000 if demand is low. He also has decided that he will open at one of these sites. He believes that there is a 60 percent chance that demand will be high. He assigns the following utilities to the different profits: U(60,000) = ? U(-20,000) = 0.20 U(90,000) = 1 U(-40,000) = 0 For what value of utility for $60,000, will Bill be indifferent between the two alternatives? (Show all your work)Two countries decide to specialize in producing certain goods to export to other countries, and in return they import different goods from these other countries. The advantage of these exports and imports is: Group of answer choices the country will be able to produce at a point outside your production possibilities frontier. the country will be able to consume at a point outside your production possibilities frontier. the countries will be able to produce and consume at a point outside your production possibilities frontier. the country's production possibilities frontier will shift outward.Decide what market structure best represents each of the scenarios listed in the table.
- Scenario: In the town of Isoville there are two grocery stores: Alfonso’s Ammenities and Bernice’s Bargains. The grocery stores are located at either end of the town, 1km apart. Recently, the manager of Alfonso’s Ammenities has proposed installing new self-service checkout technology, which promises to reduce the cost of each transaction at the grocery store by reducing staffing costs. The new technology is expected to reduce the marginal cost of selling a typical basket of groceries by $3. However, experience in other locations has shown that in about 25% of installations the self-service technology results in a significant increase in shop-lifting. In these cases, the need to hire extra security staff means that the marginal cost of a typical basket only falls by $1.50. Unfortunately, there is no way to know whether extra security will be required until after the new checkouts are installed.The Market: Isoville has 12,000 households, each of which purchases 1 basket of groceries per…If the demand shifts outward and the supply shifts outward the new equilibrium quantity will be higher, but the direction of the change in the equilibrium price is ambiguous. the new equilibrium price will be higher, but the direction of the change in the quantity is ambiguous. in the new equilibrium, the price will be higher but the quantity will be lower. in the new equilibium, the quantity will be higher but the price will be lower. in the new equilibrium, both price and quantity will be higher.You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: penguin pops, flopsicles, and cannies. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of penguin pops decreases by 8%, the quantity of flopsicles sold increases by 6% and the quantity of cannies sold decreases by 8%. Your job is to use the cross-price elasticity between penguin pops and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price elasticity…
- Q5.Consider two product designers compete where to place their product in the product space. Assume the product space is the interval from 0 to 1, including the end points. The prices of the product are fixed. Product designers place their product simultaneously in the product space. Consumer’s ideal product is spread out uniformly over the product space. Consumers like to choose their ideal product. If they cannot get their ideal product, they incur a disutility that depends linearly on the distance from their ideal product. (The disutility only depends linearly on the distance from their ideal product.) Each consumer has enough income to buy one product even if the distance from their own ideal product is 1. a. Where will the two products be placed in the Nash equilibrium if the locations of the product in the product space are chosen simultaneously? Explain. b. What are the socially optimal locations, i.e. the best locations from society’s point of view that minimise transportation…True/False For each of the following, you MUST indicate whether the statement is TRUE or FALSE and you MUST explain why. 1. 2. 3. 4. 5. A Nash Equilibrium is always Pareto Efficient. When there is production, a Competitive Equilibrium is not always Pareto Efficient due to possible increasing returns to scale. A Prisoner's Dilemma must involve prisoners. This is what makes the model interesting. A Pigouvian Tax to correct for the inefficiencies caused by a negative externality should be corrected by placing the tax between the Private Demand and the Social Demand at the intersection of Supply and Private Demand. To find the Social Welfare Function, simply add up the individual utility functions of each member of society.
- Which of the following describes features on the equilibrium outcome resulting from a decision. Pick all that apply. Multiple answers: Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation. SHOW MORE V It is the result of the decision maker maximizing her objective subject to constraints. It is an exogenous variable. It's value depends on the values of the exogenous variables in the decision process. It's value depends on the values of the endogenous varlables in the decision process.P(Q) (or MSB) = 50 - 0.5Q Р(О) (MPC) %3 25 + 0.5Q МЕС - 0.5Q Рс (Соmpetitive Equilibrium Price) %3 37.50 Qc (Competitive Equilibrium Quantity) = 25 Pe (Efficient Equilibrium Price) = 41.67 Qe (Efficient Equilibrium Quantity) = 16.66 1) Sketch the curves for these functions and illustrate the competitive equilibrium and label Pc and Qc and efficient equilibrium (labelling Pɛ and QE). 2) On the diagram from part 1, illustrate the areas that correspond to the loss in profit for the firm, the total gain to society and the net gain to society when comparing the competitive equilibrium to the efficient equilibriumMultiple choice question. As opposed to general equilibrium analysis, partial equilibrium analysis looksa) at an equilibrium and changes to it in a single, isolated market.b) at how changes in all other markets effect a particular market.c) at how equilibrium is determined in all markets simultaneously.d) at either price or quantity movements.