Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 22, Problem 11CQ
To determine
The effects of drought in a perfect competitive market.
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You are the Economic Consultant for Zuku Farms Ghana Limited. Zuku produces cowpea in a community where producers are able to switch back and forth between cowpea and groundnut depending on market conditions. Consequently, you were tasked by the management of Zuku and you estimated the demand function for cowpea as follows: where is the quantity of cowpea demanded in bags per month, is the average price of cowpea in Ghana Cedis, is the average price of groundnut in Ghana Cedis, and Y is the income of consumers. Assuming is initially GH¢31.00 per bag, Y is GH¢1001.50. Also that your estimated supply function for cowpea is as follows: QS = -25 + 3.5PC -1.5Pf – 0.5Pg + 0.25R
Where Qs is the quantity supplied of cowpea in bags, Pc and Pg are as defined above, Pf is the price of fertilizer per bag, R is the amount of rainfall (in inches).
If Pf = GH¢10, R= 40 inches and Pg= GH¢31.00
Find the resulting supply function for cowpea and determine the equilibrium price and quantity.…
please answer part d
The market for coffee (drink) in the country of Kopimana is perfectly competitive.
Kopimana is a small exporter of coffee beans, where the crop is grown by many small
farm-holdings. Suppose that bad weather conditions destroyed a significant proportion
of the coffee bean crop in Kopimana which reduced the income of the coffee bean
farmers. To assist these farmers, the government of Kopimana decided to give them an
export subsidy such that the quantity of coffee beans exported by Kopimana would
remain constant (unchanged). Based on the scenario described, answer the following
questions:
a) Since the quantity of coffee beans exported is unchanged, would the coffee bean
producers be better-off, worse-off, or as well-off as before? Explain your analysis
and illustrate using demand and supply curves.
(Hint: you may include a welfare table to support your analysis).
b) Is there any deadweight loss in the market for coffee beans? Explain your aner
and illustrate using your diagram in part…
Chapter 22 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- Parts B and Carrow_forwardMobile phones and mobile phone technology have generated significant advances in communication. You love your new job for Mobile Mint Inc., a rising player in the mobile phone industry. In a recent report on CNBC, industry analysts have reported falling prices in mobile phones along with an increased amount available in production. Using a supply and demand framework for mobile phones, which of the following statement best describes which events could have caused these changes? You will present this analysis to the board of directors at the next quarterly meeting. Student hint: this material is covered in Chapter 8 of Froeb et al. is time with a a) shock from a disruption to transit routes for microchips, an input to mobile phones Ob) chargers b. a stationary supply curve and an increase in the price of mobile phone Oc) c. an industry-wide innovation in the production process to make mobile phones d) d. a stationary demand curve and a shifting right supply curve over time O e) e. c and…arrow_forwardDraft a numerical example using the following prompt: Create a numerical example of a two-commodity market with linear demand and supply curves. The two goods should be substitues and the example should model actual goods found in the real world. The solution should have a price and quantity solution with a reasonable economic interpretation (i.e. no negative prices or quantities)arrow_forward
- You are the manager of medium-sized company that deals in production of make-ups in Ghana. Suppose one morning you heard on the news that the government has imposed a lump sum tax on every unit of make-up sold in the market. In addition, suppose during the same period, the price of a leading substitute product decreases along with the change the effect of the tax mentioned above, how would you expect the equilibrium price and quantity of make-up to change assuming the effect of the lump sum tax is larger? [Illustrate by using a graph].arrow_forwardTHIS EXERCISE FOR MATHEMATICAL ECONOMIC : Question (1): Suppose the estimated quantity demand for potato chips is Q = 140 – 15p and the quantity supply function for potato chips is Q = 115 + 10p. Find the equilibrium price and quantity for the number of bags of potato chips. Suppose that the main costs of producing potato chips are labor and potatoes. On a per unit basis, the cost of producing and manufacturing a bag of potato chips rises by $1.50. The firms are citing higher labor costs and fewer potatoes are grown due to the poor climate. What will be the new equilibrium price and quantity? Whichever curve you think a shift will occur, derive the new function. Suppose that a health news piece has been published indicating the ill effects of consuming potato chips. The news has been published after the firms incurred the higher costs of production. Consumers are being advised to consume popcorn or pretzels instead of potato chips. How would that affect the market for potato…arrow_forwardDEMAND & SUPPLY FUNDAMENTALS Analysis: September, 2017, over twenty wildfires devastated over 5000 homes, businesses, and institutions in Northwestern California. Many acres of NAPA Valley grapes and several small wineries were destroyed. Wine enthusiasts believed there would be a sharp decrease in the size of the Fall Napa Valley grape harvest. Seemingly this would not affect the market for red wines too much because there should be many substitutes from stocks around the world. However, this disaster has occurred at a particularly unfortunate time. An increasing number of research studies have concluded that red wine produced from NAPA Valley grapes is instrumental in promoting healthy heart longevity relative to red wine produced from other sources. This phenomenon is attributed to the unique microclimate and soil conditions found in NAPA Valley. You have to analyze the economics of the situation and explain it to potential investors in Napa Valley Wines. What affect…arrow_forward
- Hand written solutions are strictly prohibitedarrow_forwardConsider an equilibrium of a single product market jointly determined by a supply function q* = a, + a, * p* + U and a demand function q* = Bo + B1 * p* + V, where q* indicates the equilibrium quantity and p*indicates the equilibrium price, then A. we will run into the simultaneous equations problem, which will cause estimation inconsistency. B. we can have bi-directional causality between q* and p*. C. q* and p*will both be endogenous. D. all of the above.arrow_forwardBigSwaba Corp produces virus home test kits which it sells in the market. It pays a marketing company to post Instagram images of people using the kits in the comfort of their own homes. The demand for the kits and cost of production are as follows: 1 1 Cost: C=200+=q´ +m 1/2 Demand: p=48+m/: Where m is the firm's marketing expenditure. Assume the CEO of BigSwaba asks you to help the company maximize profit. а. How many kits should the company sell and at what price? b. What is the demand elasticity at this output level? C. What should their marketing budget be? Assume the CEO of BigSwaba realizes her bonus will determined not by profits, but by the firm's revenue. Maintaining the same marketing budget as in part a: d. What quantity should the firm produce to maximize revenue?arrow_forward
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