- Perfect Competition

A. State the short-run profit maximizing rule for a firm and explain why it ensures that profits are maximized.

B. State the condition under which a competitive firm will go out of business (i.e., shutdown) and explain why it will do so.

A course of chemotherapy costs $8000. If give to patient a, it will increase life expectancy by two months; for patient B, by six months, for patient C, by one month; for patient D, by five months; and for patient E, by four months What is the marginal cost per additional year of life for the patient most likely to benefit? What is the marginal cost per additional year of life for the patient least likely to benefit? Draw the total and marginal benefit curves (label the Y axis “Years of life gained” and the X axis “number of patients treated”). If all five patients are treated in alphabetical order, which one determines the marginal cost per year of life gained, patient A, patient E, or some other patient?

What is Barcelona, Spain goat cheese consumption rates? Please provide information on the cheese farming practices in Spain barcelona.

The ESPL (E-Sports Professional League) is a new business venture that is being loosely organized by over 60 potential teams of players. The plan is to operate weekly competitions in smaller venues that can seat up to 500 spectators. New teams can enter and exit the league at very low cost. You have been hired to act as an economic consultant to the new league.

a. Based on market research, you have estimated that the industry demand for tickets every week is given by the equation P = 100 – 0.001Q, where P is the league standard ticket price and Q is the total number of tickets sold in the league each week. You have also estimated, based on estimates of team costs, that the weekly industry ticket supply is given by the equation P = 2 + 0.0005Q. Based on your research, compute the league standard ticket price and quantity of tickets sold each week.

b. One particular team, Team Green, faces weekly total costs given by the equation C = 1000 + Q + 0.05Q2. What will be the profit-maximizing number of tickets for this team to sell each week? Show your work. Compute the weekly profit. What is the level of fixed costs?

c. Due to positive profits, new teams enter the league, forcing down the league standard ticket price. How low can the ticket price go for Team Green for it to remain in operation? Show your work.

On 26 February, Hong Kong’s Financial Secretary Paul Chan announced that all permanent residents in Hong Kong will receive a HK$10,000 from the HKSAR government. This policy will cost the HKSAR government roughly HK$71 billion and it is aimed at tackling the worse economic downturn that the city has experienced in the last 10 years.

a. Briefly explain why this policy can increase equilibrium output in the short run.

b. An economist argues that if the HKSAR government spends HK$71 billion on goods and services instead of giving each Hong Kong resident a HK$10,000, the policy effect on output would be larger. Briefly discuss the economic rationale behind this economist’s argument.

Recall the Application about the decrease in price of illegal drugs in the United States to answer the following question(s).


Recall the Application. The decrease in price of illegal drugs could be caused by either a(n) ________ in demand or a(n) ________ in supply of the drugs.

1. Describe any five Employee Sourcing Challenges facing Human Resource Managers in Organizations Today

Assignment Question(s):                                                    (Marks:30)

Q. 1. Suppose both supply and demand in a market are relatively inelastic. Will a tax placed on the product in market generate a relatively large or small deadweight loss? Why? [15 Marks]

Q. 2. If the world price of a good exceeds the domestic price of the good, will the country export or import the good. In this scenario who gain from free trade: Domestic consumers or Domestic producers? Explain. [15 Marks]

b. Supply i. Define supply. ii. State the law of supply. iii. List and explain the determinants of supply and how each can either cause an increase in supply and a decrease in supply. 1. There are 6 determinants of supply listed in the slide set. You should be able to list and explain how each shifts the supply curve to the left or right. iv. Thoroughly and completely explain the differences between a change in supply and a change in quantity supplied and the causes of those changes. 1. Be sure you include the causes of the changes!

4) Consider a decision that you made recently (i.e. within the last two weeks or so). Answer the following questions:

1. a) What were the benefits and costs that you considered when making your decision?

2. b) Would any of those costs that you identified in (a) above be considered sunk costs?

3. c) Were there any additional marginal benefits or marginal costs associated with the decision that you think you should have considered?

Consider a firm with a production function Q(L,K) = √L + 2√K, that faces an inverse demand function P (Q) = 250 - 2Q, and the labor and capital markets are also in perfect competition.

A) Derive the expression for the profit function of the firm in terms of labor and capital and express the profit maximization problem the firm faces.

B) Derive the first-order conditions, and use them to get the expressions for the optimal amounts of labor and capital, L* and K*.

C) Using the expressions for L* and K*, get the expressions for Q*, P*, R* (optimal revenue), C* , and π*.

D) Derive the expressions for the sufficient second order conditions for a maximum. Are they always satisfied, or only for a certain range of values for L and K?

1. Assume that the population variance is unknown. We test the hypothesis that Ho: µ=5 against the alternative that it is not at a level of significance of 5% and a sample size of n=151. We calculate a test statistic = -1.976. The p-value of this hypothesis test is approximately ______%, Write your answer in percent form. In other words, write 5% as 5.0

2. When choosing between two unbiased estimators, we prefer to use the one that is most efficient.

3. If a null hypothesis is rejected at the 5% significance level but not at the 1% significance level, then the p-value of the test is less than 1%.

Most states today have four main types of criminal homicide. Define and discuss these and provide examples.

Three of the fundamental economic questions or choices that a society has to deal with are: What to produce? How to produce? and For Whom to produce? Discuss how these three basic questions are answered or decided in a market system.