Please answer question 1-d 1. The American Mining Company is interested in obtaining quick estimates of the supply and demandcurves for coal. The firm's research department informs you that the elasticity of supply is approxi-mately 1.7, the elasticity of demand is approximately -0.85, and the current price and quantity are$41 and $1,206, respectively. Price is measured in dollars per ton, quantity is captured as number oftons per week.(a) Is demand elastic, inelastic or unit elastic? Explain.(b) Write down the linear supply and demand curves at the current price and quantity.(c) Using Excel, provide a graph of the demand and supply curves. Is the market in equilibrium?(d) Calculate the Total Revenue, Average Revenue, and Marginal Revenue of the American MiningCompany at the equilibrium price and quantity.2. Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY2. Thecurrent market price for X is £10, while the market price for Y is £5. Sally's current income is £500.(a) Sketch a set of two indifference curves for Sally in her consumption of X and Y.(b) Write the expression for Sally's budget constraint. Graph the budget constraint and determineits slope.(c) Determine the X,Y combination which maximises Sally's utility, given her budget constraint.(d) Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15.What will happen to her utility as a result of the price increase?3. Duane breeds parrots for a living. He has discovered that the production function for parrot chicksis:Q=K0.5 F0.5where K is capital (for example nest boxes, cages and the like) and F is parrot food. The price of Kis $8 and the price of F is $2.(a) What type of production function is this? Explain.(b) Does this production function exhibit constant, increasing or decreasing returns to scale? Providea graph of the function using Excel.(c) Find the marginal products of capital and food.(d) Suppose that Duane wants 144 parrot chicks, how much K and F should be employed to minimisecosts. What is the cost of producing 144 parrot chicks?1

Total revenue is the sum of all funds received by a company from the sale of a specific output. It…

Answered: Please answer question 1-d

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Economics

Please answer question 1-d

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.

Question

Please answer question 1-d

1. The American Mining Company is interested in obtaining quick estimates of the supply and demand
curves for coal. The firm's research department informs you that the elasticity of supply is approxi-
mately 1.7, the elasticity of demand is approximately -0.85, and the current price and quantity are
$41 and $1,206, respectively. Price is measured in dollars per ton, quantity is captured as number of
tons per week.
(a) Is demand elastic, inelastic or unit elastic? Explain.
(b) Write down the linear supply and demand curves at the current price and quantity.
(c) Using Excel, provide a graph of the demand and supply curves. Is the market in equilibrium?
(d) Calculate the Total Revenue, Average Revenue, and Marginal Revenue of the American Mining
Company at the equilibrium price and quantity.
2. Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY2. The
current market price for X is £10, while the market price for Y is £5. Sally's current income is £500.
(a) Sketch a set of two indifference curves for Sally in her consumption of X and Y.
(b) Write the expression for Sally's budget constraint. Graph the budget constraint and determine
its slope.
(c) Determine the X,Y combination which maximises Sally's utility, given her budget constraint.
(d) Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15.
What will happen to her utility as a result of the price increase?
3. Duane breeds parrots for a living. He has discovered that the production function for parrot chicks
is:
Q=K0.5 F0.5
where K is capital (for example nest boxes, cages and the like) and F is parrot food. The price of K
is $8 and the price of F is $2.
(a) What type of production function is this? Explain.
(b) Does this production function exhibit constant, increasing or decreasing returns to scale? Provide
a graph of the function using Excel.
(c) Find the marginal products of capital and food.
(d) Suppose that Duane wants 144 parrot chicks, how much K and F should be employed to minimise
costs. What is the cost of producing 144 parrot chicks?
1

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