Suppose that land is specific to corn, capital is specific to automobiles, labor is mobile between sectors, and payments are as follows: Sales revenue = 400; payments to labor = 100; payments to capital = 300 Corn:Sales revenue = 300; payments to labor = 250; payments to land = 50. Holding the price of automobiles constant, suppose the increase in the price of corn is 10% and the increase in the wage is 5%. What is the impact of this on the rental of land and the rental of capital?

Suppose that land is specific to corn, capital is specific to automobiles, labor is mobile between sectors, and payments are as follows: Sales revenue = 400; payments to labor = 100; payments to capital = 300 Corn:Sales revenue = 300; payments to labor = 250; payments to land = 50. Holding the price of automobiles constant, suppose the increase in the price of corn is 10% and the increase in the wage is 5%. What is the impact of this on the rental of land and the rental of capital?

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 that land is specific to corn, capital is specific to automobiles, labor is mobile between sectors,
and payments are as follows: Sales revenue = 400; payments to labor = 100; payments to capital = 300
Corn:Sales revenue = 300; payments to labor = 250; payments to land = 50. Holding the price of
automobiles constant, suppose the increase in the price of corn is 10% and the increase in the wage is
5%. What is the impact of this on the rental of land and the rental of capital?

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Two software companies sell competing products. These products are substitutes so that the number of units that either company sells is a decreasing function of its own price and an increasing function of the other product’s price. Let P1 and X1 be the price and quantity sold of product 1, and P2 and X2 the price and quantity sold of product 2. We have that and . Each company has incurred a fixed cost for designing their software and writing programmes, but the cost of selling to an extra user is zero. As the firms compete in prices, each company will choose a price that maximises its profits. Explain why the price that maximises each company’s profits is the same as the price that maximises its total revenue. Write an expression for the total revenue of each company as a function of it its price and the other company’s price. Company’s 1 best response function BR1(P2) is the price of product 1 that maximises its profits given the price of product 2 is P2. Similarly,…
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