Problem 1. Consider the Sticky price model that we discussed during the lecture, and suppose that The firm with flexible prices follow p = P + a(Y – Y), • The firm with sticky prices follow, the same rule but take the expectation of the RHS, i.e.,_p = E[P+ «(Y – Y)]. Further, assume that_a = 2, Y = 100, EP = 60, s = 0. 25 a) Derive the SRAS curve (i.e.,obtain an equation for the SRAS). b) Draw a figure show the SRAS and LRAS curves on the figure. c) Derive the SRAS curve when EP increases to EP=120. d) Derive the SRAS curve when EP is still the same as in part a (i.e., EP=60), But

Problem 1. Consider the Sticky price model that we discussed during the lecture, and suppose that The firm with flexible prices follow p = P + a(Y – Y), • The firm with sticky prices follow, the same rule but take the expectation of the RHS, i.e.,_p = E[P+ «(Y – Y)]. Further, assume that_a = 2, Y = 100, EP = 60, s = 0. 25 a) Derive the SRAS curve (i.e.,obtain an equation for the SRAS). b) Draw a figure show the SRAS and LRAS curves on the figure. c) Derive the SRAS curve when EP increases to EP=120. d) Derive the SRAS curve when EP is still the same as in part a (i.e., EP=60), But

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7. A car manufacturer builds both left-hand and right-hand drive cars. It estimates that its costs and the demand faced in each of these respective markets can be modelled by the functions below Р 3D 520 — 30, P, = 720 – 4Q2 100Q1 + 120Q2 + 4Q1Q2 - - TC =
11. A company produces a certain good for which the (inverse) demand function is given by p = 15 - 2q, where p is the unit price (expressed in some monetary unit) and q is the quantity sold (expressed in some non-specified unit). The fixed costs amount to 6.5 monetary units and the variable costs amount to 1 monetary unit per non-specified unit of the good. We assume that all goods produced are sold. a. Find the function equation for the profit functionP in terms of the quantity q. b. Find the domain of the profit function P. c. Determine for which production levels q the company makes a profit.
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Consider a 2 period oil extraction setting. The inverse demand for oil is given as ?(?) = 20 − ?. The MC of extraction is MEC = Q. The discount rate is r = 0.05. a) If the initial stock of oil in the ground is S = 25, what will be the extraction and price each period? b) If S = 15, what will be the extraction and price each periods?
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The demand for product Q is given by Q = 220 - P and the total cost of Q by: STC =1000+80Q -3Q² +=Q³ 3 3 a. Find the price function and then the TR function. See Assignment 3 or 4 for an example. b. Write the MR and MC functions below. Remember: MR = d.TR/dQ and MC = dS.TC/dQ. See Assignment 5 for a review of derivatives. c. What positive value of Q will maximize total profit? Remember: setting MR = MC and solving for Q will give you the Q that maximizes total profit. The value of Q you get should not be zero or negative. d. Use the price function found in (a) to determine the price per unit that will need to be charged at the Q found in (c). This will be the price you should ask per unit for each unit of Q that maximizes total profit. e. How much total profit will result from selling the quantity found in (c) at the price found in (d)? Remember: profit is TR - STC. f. At what level of Q is revenue maximized? Remember, let MR = 0 and solve for Q. MR = 0 signals the objective of…
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