In: Economics

Consider the following marginal
benefit (demand) curves of two individuals for a certain good:
MB_{A}(q) = 100 – q and MB_{B}(q) = 300 – q.

Consider the Marginal Private Costs of providing Fireworks in The Park, MC(q) = 50 + q.

- Find q
^{M}, the amount of Fireworks in the Park provided by the Market, when individuals provide the good with no co-operation and act only in their self-interest. - What is the efficient level of Fireworks in the Park, q*?
- Person B brings a friend to the park (person C), with the same
MB curve as theirs (MB
_{C}= 300 – q). Find the new quantity provided by the Market (q^{M}) and the new efficient level of Fireworks in the Park (q*). - Despite being visually appealing, fireworks are known to cause
negative externalities such as noise pollution and increased deaths
by heart attacks in dogs. We estimated the marginal external costs
of Fireworks in the Park, MEC (q) = 70 + q. What is the new
efficient level of Fireworks in the Park? Consider the MSB curve
found in part f, which includes person C. How does this new
efficient allocation compare to the Market equilibrium,
q
^{M}, found in f?

**PArt a) when individuals provide the good
with no co-operation and act only in their self-interest.Then each
individual will consume at the point where its marginal benefit
equals marginal private cost**

**Therefore, if each individual acts in his self
interest 150 units of fireworks will be provided by the
market**

**Part b) efficient level would be found at the point
where sum of marginal benefit of the 2 individuals
equals**

**Part c) another person C comes in the market whose
marginal benefit is same as person B**

**If all 3 of them acts in self interest, they will
consume at point where marginal benefit equals marginal private
cost**

**Therefore, if each individual acts in his self
interest 275 units of fireworks will be provided by
the**

**Efficient level at point where sum of marginal
benefit of the 3 persons is equal to marginal provate
cost**

**Part c) if there external costs of fireworks then
efficient level is at the point where marginal benefit equals
marginal social cost**

2. Assume the following two demand curves:
Marginal Willingness to Pay = 18 - .45 Q
Marginal Willingness to Pay = 26 – 3 Q
Solve for the
following:
a)Start each curve at a price of $5 and increase the price to
$7.50, what is the percent change in quantity demanded on each
curve (hint: watch your signs)
b)Find the elasticity of each of these curves at this price
change.
c) Are (A) and (B) elastic or inelastic.
d) Describe...

14.
Consider a monopoly facing the following demand, marginal revenue,
total cost, and marginal cost curves:
Demand curve: P = 12 – 0.002 Q
Marginal revenue curve: MR = 12 – 0.004 Q
Total cost curve: TC = 3Q +0.0005Q2
Marginal cost curve: MC = 3 + 0.001 Q
a. Calculate the profit maximizing output of this monopoly.
Briefly explain your answer.
b. What is the socially efficient output level? Briefly explain
your answer.
c. Suppose the government wants to...

Consider the following information on the production of
basketballs. Demand: P = 10 – Q; Marginal Revenue = 10 – 2Q;
Marginal Cost = 1 + Q. In a competitive market, what would the
price and quantity be? Now assume this is a monopolistic market.
What quantity will the monopolist produce? How much will it charge?
Again, assume this is a monopolistic market. Calculate the
deadweight loss to society (Hint: the area of a triangle is
0.5*B*H, where B =...

Suppose that market demand for a good is Q = 480 - 2p. The
marginal cost is MC = 2Q. Calculate the following in the context of
a monopoly market. a) Profit maximizing price and quantity. b)
Market power. c) Consumer surplus and producer surplus. d) Dead
Weight Loss (DWL).

2) Consider the following labor supply, demand, and marginal
wage cost curves. ?=5+? ? = 40 − 3? ??? = 5 + 2? a) Find the labor
quantity which will be employed, and the wage which will be paid by
a competitive firm. Show on a graph. b) Find the labor quantity
which will be employed, and the wage which will be paid by a
profit- maximizing monopsonist. Show on a graph.

Firms produce a quantity of a good Q, with marginal social
benefits (demand curve) of PMB(Q) = SMB(Q) = 6 − Q. Suppose that
the marginal costs of producting the amount Q of the good is PMC(Q)
= 2 + Q. Suppose that the industry also creates as a byproduct of
the production process a carbon sink, which soaks up excess C02.
Suppose the marginal benefit to society of producing Q units is
MB(Q) = Q/3.
a. What is the...

2. Consider the following market for a private good, where Anne
and
Beverly’s inverse demand curves are given by
PA= 500−Q
PB= 500−2Q
The marginal cost of this good is
M C= 2Q
(a) Calculate the market demand curve
(b) Depict this market graphically.
(c) Calculate the market price and quantity that will be
produced,
assuming this market is perfectly competitive.
(d) Argue that this outcome is Pareto Efficient.
(e) Suppose instead that this good is a pure public good....

Consider the demand curves for beer: Q= 40 –2P. If the supply
curve for beer is P=10 and the government imposes a tax of 2 on
beer, the total revenue raised is equal to:

Assignment: Draw a graph for a monopoly with
demand, marginal revenue, and marginal cost curves. Identify the
profit-maximizing output level (Qm) and price (Pm). (Photos of your
work are not accepted) Suppose the monopolist sells Qm units of
output at the regular price and then puts the product on sale at a
lower price, Ps. Show the new price and quantity. What happens to
the firm’s profits? Does price discrimination lead to a more
efficient or less efficient outcome? Why...

Consider a market for
a good characterized by an inverse market demand P(Q) = 200−Q.
There are two firms, firm 1 and firm 2, which produce a homogeneous
output with a cost function C(q) =q2+ 2q+ 10.
1. What are the
profits that each firm makes in this market?
2. Suppose an
advertising consultant approaches firm 1 and offers to increase
consumers’ value for the good by $10. He offers this in exchange
for payment of $200. Should the firm...

ADVERTISEMENT

ADVERTISEMENT

Latest Questions

- The relationship between Laptop and Screen can best be categorized as Inheritance Association Ownership Private What...
- 1. Create a symbolic constant called PI in two different manners. For both, the value that...
- Alpha Enterprises, Inc. has a WACC of 14.50% and is considering a project that requires a...
- A small metal bead, labeled A, has a charge of 29 nC . It is touched...
- Describe current recordkeeping approaches in clinics or wellness centers. What steps would ensure client access and...
- this is a C++ class Topics Numeric Input (Whole Numbers) Assignment Finding Quotient Finding Remainder Numeric...
- Describe the purpose of the logical network perimeter mechanism and how it establishes a logical boundary....

ADVERTISEMENT