Suppose, if ill, that Fred’s demand for health services is summarized by the demand curve Q...

Suppose, if ill, that Fred’s demand for health services is summarized by the demand curve Q = 50 − 2P , where P is the price of services. How many services does he buy at a price of $20? Suppose that Fred’s probability of illness is 0.25. What is the actuarially fair price of health insurance for Fred with a zero coinsurance rate? If the insurance company pays Fred’s entire loss, will the insurance company offer him insurance at the actuarially fair rate? Why?

Expert Solution

Rahul Sunny answered 2 years ago

Suppose that the demand curve for wheat is Q= 120-10p and the supply curve is Q=10p...

Suppose that the demand curve for wheat is Q= 120-10p and the supply curve is Q=10p The government imposes a price ceiling p =$ 3 per unit. a. How do the equilibrium price and quantity change? (round quantities to the nearest integer and round prices to the nearest penny) The equilibrium quantity without the price ceiling is 60 and the price without the price ceiling is $6. The equilibrium quantity with the price ceiling is 30. b. What effect does...

Suppose you have a demand curve of P = 10 - Q and a supply curve...

Suppose you have a demand curve of P = 10 - Q and a supply curve of P = 2 + Q. If the government imposes a tax of $8 per unit of quantity sold on the sellers in this market, then what is the market quantity traded as a result of the tax? Then, what are the consumer surplus, producer surplus, and deadweight loss (after the $8 tax)?

Suppose the demand curve for aluminum is Q = 800 – 10P, where P is the...

Suppose the demand curve for aluminum is Q = 800 – 10P, where P is the price per unit of aluminum and Q measures millions of units of aluminum. The private marginal cost of producing aluminum is MC = Q + 20, while the external marginal cost of producing aluminum is $10. Find the equilibrium price and quantity when the firm ignores the cost of the externality; Find the equilibrium price and quantity when the cost of the externality is...

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.

Suppose that a firm estimates that the demand curve for its product is Q= 120,000 -...

Suppose that a firm estimates that the demand curve for its product is Q= 120,000 - 10,000P. Suppose that the firm has fixed costs of $12,000 and variable costs per unit (AVC) is $1.50. Write an equation for total profits in terms of Q. At what level of output (Q) are total profits maximized? What price will be charged? What are total profits at this output level? Check your answers in part e) by equating marginal revenue and marginal cost functions and solving for...

1. Suppose the Demand curve for heaters is P = 100 – Q. Suppose firms face...

1. Suppose the Demand curve for heaters is P = 100 – Q. Suppose firms face a constant Marginal Cost of $20 per heater. In perfect competition (part 2 of the class) we learned that the competitive price of heaters would be $20 (with constant MC, MC = AC). What would the monopoly price and quantity of heaters be? Compare the welfare of these two markets (consumer surplus, producer surplus, and deadweight loss). (2 pts)

Suppose that the demand curve for new cars is Q = 120 - P (making inverse...

Suppose that the demand curve for new cars is Q = 120 - P (making inverse demand P = 120 - Q) and the supply curve cost is horizontal at $24 per car. a. What is the equilibrium price and quantity of cars? b. Now suppose that each car produces one unit of smog, that imposes an external cost of EC = 0.01s 2 . Total social costs are now the sum of the $24 in production costs and the...

Example 4: Suppose that the monopolist faces a demand curve for its widgets as q =...

Example 4: Suppose that the monopolist faces a demand curve for its widgets as q = 9 - 0.2p. The firm’s marginal revenue and cost functions are: MR(q) = 45 – 10q and MC(q) = 15 + 5q. The firm’s total cost function is C(q) = 2.5q2 + 15q + 3. How many widgets should the firm produce and sell so that the monopolist can maximize its profits? How much should the firm charge to each of its customers so...

Suppose that the market demand curve for cornflakes cereal is Q = 600 - 40P where...

Suppose that the market demand curve for cornflakes cereal is Q = 600 - 40P where Q is the quantity of cornflakes bought in thousands of boxes per week and P is the price per box (in Kwacha). a) At what price does the demand for cornflakes go to 0? show that the demand for cornflakes is elastic at this price. b) How much cornflakes is demanded at a price of K0? show that demand is inelastic at this price....

Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose there...

Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose there are 100 firms in the market each with a cost function c(q) = q2 + 1. (a) Determine the short-run equilibrium. (b) Is each firm making a positive profit? (c) Explain what will happen in the transition into the long-run equilibrium. (d) Determine the long-run equilibrium.

Question