2. Consider an inverse demand curve and inverse supply curve given by Q D = 52,...

2. Consider an inverse demand curve and inverse supply curve given by Q D = 52, 000 − 200P Q S = −8, 000 + 400P a. Find equilibrium price. b. Find equilibrium price. c. Now solve for producer surplus at equilibrium. Show your work! HINT: You will need to know find what price is when the supply curve crosses the y-axis. d. And do the same for consumer surplus at equilibrium. Show your work! e. What if the government instead mandates a policy that imposes a price ceiling of $120 (so can’t charge above $120). What happens first to producer surplus, and then to consumer surplus? Show your work! HINT: Don’t overthink it!

Solutions

Expert Solution

Rahul Sunny answered 1 month ago

Next > < Previous

Related Solutions

Consider an oligopoly with 2 firms. The inverse demand curve is given by P = 100...

Consider an oligopoly with 2 firms. The inverse demand curve is given by P = 100 – Q1 – Q2. Firm 1’s total cost function is TC1 = 30Q1. Firm 2’s total cost function is TC2 = 20Q2. Assume now that the firms compete by choosing their prices simultaneously, so it is a Bertrand Oligopoly model. Assume that firms choose prices in 0.01 in intervals. (i.e. A firm can choose to charge $10.00 or $10.01, but not $10.005). a) Consider...

A small country’s demand curve is given by Q=10-(P/2) and its supply curve is given by...

A small country’s demand curve is given by Q=10-(P/2) and its supply curve is given by Q=P-5. Assume that there is initially free trade and that the world price under free trade is $7. If an import quota of 1.5 is now introduced in this country, what will be the change in this country’s government revenue (everything else being equal) if foreign firms have to acquire an import licence at full value? A increases by 7 B increases by 3...

Monopoly with linear inverse demand. Consider a monopolist facing a linear inverse demand curve p(q)= a-...

Monopoly with linear inverse demand. Consider a monopolist facing a linear inverse demand curve p(q)= a- bq, and cost function C(q)= F + cq, where F denotes its fixed costs and c represents the monopolist's (constant) magical cost a>c 1. Graph demand, marginal revenue and marginal cost. Label your graph carefully, including intercepts 2. Solve the profit maximizing output q^m. To do this, first write down the expression for MR=MC and solve for the optimal quantity. Next find the price...

Suppose the internal supply curve is given by P=6+(2/3)Q, the internal demand curve is given by...

Suppose the internal supply curve is given by P=6+(2/3)Q, the internal demand curve is given by P=12-(1/3)Q, and the social supply curve is given by P=9+(2/3)Q. a. (3 points) Algebraically solve for the coordinates of the market equilibrium and the coordinates of the social optimum. b. (3 points) Labelling everything, graph these three curves and clearly indicate the market equilibrium, the social optimum, and the triangle corresponding to the deadweight loss. (In the interest of time, you do NOT have to draw...

Consider a market with a demand curve given (in inverse form) by P(Q)=50−0.25QP(Q)=50−0.25Q, where QQ is...

Consider a market with a demand curve given (in inverse form) by P(Q)=50−0.25QP(Q)=50−0.25Q, where QQ is total market output and PP is the price of the good. Two firms compete in this market by sequentially choosing quantities q1q1 and q2q2 (where q1+q2=Qq1+q2=Q). This is an example of: Choose one: A. Cournot competition. B. Bertrand competition. C. perfect competition. D. Stackelberg competition. Part 2(4 pts) Now suppose the cost of production is constant at $20.00 per unit (and is the same...

2. The inverse demand curve of a monopolist is given by: P = 200 −...

2. The inverse demand curve of a monopolist is given by: P = 200 − Q and the marginal cost is constant at $10, how does charging the monopoly a specific tax of τ=$12 per unit affect the monopoly optimum and the welfare of consumers, the monopoly, and society (where society's welfare includes the tax revenue)? Calculate the following: equilibrium price and quantity before the tax equilibrium price and quantity after the tax the change in consumer surplus the...

Consider a market where inverse demand is given by P = 40 − Q, where Q...

Consider a market where inverse demand is given by P = 40 − Q, where Q is the total quantity produced. This market is served by two firms, F1 and F2, who each produce a homogeneous good at constant marginal cost c = $4. You are asked to analyze how market outcomes vary with industry conduct: that is, the way in which firms in the industry compete (or don’t). First assume that F1 and F2 engage in Bertrand competition. 1....

The demand for TOMS shoes is q=104-2p and the inverse supply is given as p=q/4+33. A...

The demand for TOMS shoes is q=104-2p and the inverse supply is given as p=q/4+33. A tax of $2 per pair of shoes is imposed. The number of pairs of TOMS sold falls. By how much does it fall?

Suppose the supply curve for steel is given by P=Q and the demand for steel is...

Suppose the supply curve for steel is given by P=Q and the demand for steel is given by P=100- 2Q. The production of steel is associated with a constant external cost of $10 per unit. a. Calculate the private equilibrium. What are equilibrium price and quantity? b. What is the deadweight loss associated with the private equilibrium. Calculate and draw a sketch.

Consider an aggregate supply curve described by MC =5 + Q and an aggregate demand curve...

Consider an aggregate supply curve described by MC =5 + Q and an aggregate demand curve described by MWTP = 20 –2 Q. 2a. What is the consumer surplus in the market equilibrium? 2b. What is the producer surplus in the market equilibrium?

Subjects