Question

In: Economics

The marginal value and average expenditure curves for a market are given by: MV = 90...

The marginal value and average expenditure curves for a market are given by: MV = 90 - 1.5Q AE = .75Q a) Find the equilibrium price and quantity if the market is perfectly competitive. b) Find the equilibrium price and quantity if the market has a Monopsony. c) Find the difference in total surplus between the perfect competition case and the Monopsony case. d) Suppose that the monopsony was publically owned and returns all profits to the public, is the market still inefficient?

Expert Solution

Input market equilibrium,if market is perfect competition.

MV=AE

90-1.5Q=0.75Q

90=2.25Q

Q=90/2.25=40

Price of input=0.75*40=30

Buyer surplus=1/2*40*(90-30)=20*60=1200

Seller surplus=1/2*40*30=20*30=600

TOtal surplus=1200+600=1800

B) monopsony input market equilibrium at

MV=ME/MC

AE=0.75Q

ME/MC=1.5Q

Equilibrium,

MV=ME

90-1.5Q=1.5Q

Q=90/3=30

Equilibrium price of input=0.75*30=22.5

ME=1.5*30=45

Buyer surplus=(45-22.5)*30+1/2*30*(90-45)=22.5*30+15*45=1350

Seller surplus=1/2*30*22.5=15*22.5=337.5

Total surplus=1350+337.5=1687.5

C) difference between total surplus of perfect competition and monopsony=1800-1687.5=112.5

D)Yes, because even the surplus goes to goverment and they use this for society welfare but still the total market welfare is lower than perfect competition equilibrium total welfare.

It doesn't matter who gets the surplus,to be an efficient market,the total surplus needs to be Maximized.

Rahul Sunny answered 7 months ago

Question 2 2.1. Using average and marginal cost curves and average and marginal revenue curves show...

Question 2 2.1. Using average and marginal cost curves and average and marginal revenue curves show a firm in a perfectly competitive market in short run making and maximising its profit. (Draw a diagram and explain it.) 2.2. Using average and marginal cost curves show a firm in a monopolistically competitive market making a loss whilst simultaneously behaving rationally in the short run. (Draw a diagram and explain it.) 2.3. Explain the Prisoner’s Dilemma. (You can use a pay-off matrix...

Suppose that the annual market demand for Bleebs is given by Q=3750-75P The average and marginal...

Suppose that the annual market demand for Bleebs is given by Q=3750-75P The average and marginal costs of producing Bleebs are $10/bleeb. A) If the firm acts as a single-price monopoly, what are the monopoly quantity, price, and profit? B) Suppose that there are three hundred identical customers in this market. What is the best two-part tariff that the monopolist can use? If the monopolist implements the two-part tariff, how much profit will it make? C) It turns out that...

MV Corporation has debt with market value of $98 million, common equity with a book value...

MV Corporation has debt with market value of $98 million, common equity with a book value of $105 million, and preferred stock worth $21 million outstanding. Its common equity trades at $55 per share, and the firm has 6.5 million shares outstanding. What weights should MV Corporation use in its WACC? The debt weight for the WACC calculation is nothing _____%. (Round to two decimal places.)

MV Corporation has debt with market value of $101 million, common equity with a book value...

MV Corporation has debt with market value of $101 million, common equity with a book value of $95 million, and preferred stock worth $22 million outstanding. Its common equity trades at $50 per share, and the firm has 5.8 million shares outstanding. What weights should MV Corporation use in its WACC? The debt weight for the WACC calculation is _____. (Round to two decimal places.) The preferred stock weight for the WACC calculation is _______(Round to two decimal places.) The...

For the pizza seller whose marginal, average variable and average total cost curves are shown in the graph below

For the pizza seller whose marginal, average variable and average total cost curves are shown in the graph below, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $1.00 per slice? Instructions: In the graph below, label all three curves by clicking on the dropdown to select the appropriate label. Then, indicate the profit-maximizing level of output. Enter your response as a whole number.At the profit-maximizing level of output,...

The corn market is perfectly competitive, and the market supply and demand curves are given by...

The corn market is perfectly competitive, and the market supply and demand curves are given by the following equation: Qd =50,000,000 – 2,000,000 p Qs = 10,000,000 +5,500,000 p Where Qd and Qs are quantity demanded and quantity supplied measured in bushels, and P= price per bushel. 1) Determine consumer surplus at the equilibrium price and quantity.

The graph shows the marginal cost and average total cost curves for a perfectly competitive firm....

The graph shows the marginal cost and average total cost curves for a perfectly competitive firm. The horizontal axis measures output in thousands of units per year, from 0 to 50, increasing by 10. The vertical axis measures the revenue and cost in dollars per unit, from 0 to $25, increasing by $5. The graph shows two U-shaped curves, labeled MC and ATC. The minimum point of the ATC curve corresponds to an output of 30 and a cost of...

a. Explain why the marginal cost curve intersects the average total and variable cost curves at...

a. Explain why the marginal cost curve intersects the average total and variable cost curves at their respective minimum values: b. At what point on the ATC will a perfectly competitive firm always produce in the long run: c. The supply curve for a perfectly competitive firm is the same as one of the cost curves based on a specific criterion, state both the curve and the criterion.

1) Show the average product and marginal product curves for a business. Also show and label...

1) Show the average product and marginal product curves for a business. Also show and label the point of diminishing returns, the axes, and the curves. 2) Explain briefly the relationship between an isocost line and an isoquant. Make sure to explain what the two curves represent and the relationship between the two at the optimal cost minimization point. A graph may be helpful in your explanation. Please help me with these 2 questions and draw the graphs for both...

Why are the marginal and average cost curves U shaped? Explain what is the relationship between...

Why are the marginal and average cost curves U shaped? Explain what is the relationship between the marginal cost of production and marginal product of labour in the short term.