EBK MICROECONOMICS
EBK MICROECONOMICS
4th Edition
ISBN: 8220103647830
Author: KRUGMAN
Publisher: MAC HIGHER
Question
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Chapter 4, Problem 10P
To determine

Streaming music services have changed the way we listen to music. Spotify, Pandora, Tidal and Google Play are some of more popular services. These companies offer free access to music. For a small monthly fee users can purchase premium access and listen to millions of songs on demand and free. But not all artists are fans of free streaming music. In 2016, Taylor Swift’s move to prevent Spotify from playing her new release, 1989, for free, made national headlines. When Spotify refused to restrict access to only paying customers, Swift would not allow the company to paly her music for free. Sheis not alone. Adele, Dr, Dre, Garth Books, and Coldplay have all had run-ins with free streaming services.

  1. The impact of free music and video content through free music streaming services on the record companies’ producer surplus from music sales. The record companies’ incentives to produce music in future.
  2. If artists are not allowed to prevent their music from free streaming services, the impact that it will have on mutually beneficial transactions in the future.

Concept Introduction:

Producer Surplus:

The difference between the price that the producer gets while selling a product and the minimum price at which the producer is willing to sell the product.

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Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.
Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…
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