Question

In: Economics

Suppose the economy has access to 1000 Mahogany trees, used for making guitars. Processing the trees...

Suppose the economy has access to 1000 Mahogany trees, used for making guitars. Processing the trees for guitar production costs $1 per tree. This economy may access 1000 additional trees (perhaps existing in the outskirts of the town) but it costs $3 to use each of those trees. Assume 5 trees are needed to produce one guitar.

Questons :

(1) What is the Supply curve for guitar production? You may answer with a fully labeled picture.

(2) If the demand function for guitars is D(p)=220-2p, what is the equilibrium price and quantity in the market for guitars? Credit is based on the logic of your explanations, so explain your reasoning!

(3) Suppose the government wants to incentivize people to play more guitar, so they place a subsidy of $5 per guitar. That is, if the consumer pays p, the firm gets p+5. Will the government achieve it's goal of having more guitars bought in equilibrium? Credit is based on the logic of your explanations, so explain your reasoning!

Solutions

Expert Solution


Related Solutions

Suppose the economy has access to 1000 Mahogany trees, used for making guitars. Processing the trees...
Suppose the economy has access to 1000 Mahogany trees, used for making guitars. Processing the trees for guitar production costs $1 per tree. This economy may access 1000 additional trees (perhaps existing in the outskirts of the town) but it costs $3 to use each of those trees. Assume 5 trees are needed to produce one guitar. Questons : (1) What is the Supply curve for guitar production? You may answer with a fully labeled picture. (2) If the demand...
Suppose the economy has access to 1000 Mahogany trees, used for making guitars. Processing the trees...
Suppose the economy has access to 1000 Mahogany trees, used for making guitars. Processing the trees for guitar production costs $1 per tree. This economy may access 1000 additional trees (perhaps existing in the outskirts of the town) but it costs $3 to use each of those trees. Assume 5 trees are needed to produce one guitar. Questions : (1) What is the Supply curve for guitar production? You may answer with a fully labeled picture. (2) If the demand...
Decision trees are used to graphically depict a decision making situation. Propose a business decision in...
Decision trees are used to graphically depict a decision making situation. Propose a business decision in which you intend to use Expected Monetary Value (EMV) as your decision making technique. Describe how you would determine the best decision using the EMV criterion with a decision tree.(If you have no experience with this type thing, then try to imagine a situation in which EMV and Decision Trees could be used and propose an example) In all discussion question responses ensure that...
Suppose there are two closed economies: Economy A and Economy B. Economy A has a high...
Suppose there are two closed economies: Economy A and Economy B. Economy A has a high average rate of time preference relative to economy B’s low average rate of time preference. (1) Describe the differences you would expect to see with respect to interest rates and levels of investment in the two economies. (2) Describe what would occur if these countries were open to international capital flows. (This is the key to answering Bernanke’s question)
Suppose there are two closed economies: Economy A and Economy B. Economy A has a high...
Suppose there are two closed economies: Economy A and Economy B. Economy A has a high average rate of time preference relative to economy B’s low average rate of time preference. (1) Describe the differences you would expect to see with respect to interest rates and levels of investment in the two economies. (2) Describe what would occur if these countries were open to international capital flows. (This is the key to answering Bernanke’s question)
Suppose that, in an economy, every shop allows electronic payment by making more point of sales...
Suppose that, in an economy, every shop allows electronic payment by making more point of sales (POS) terminals available. What are the effects of this facility on the demand for money and on the price level?
A 1000 litre containment tank catches the outflow from a processing apparatus which has 800 litres...
A 1000 litre containment tank catches the outflow from a processing apparatus which has 800 litres of water with 2 g of chemical agent dissolved in it. Additional supply comes into the tank at 3 litres/hr containing 5 g/litre of the chemical agent. The solution leaves the containment tank at 3 litres/hr. When the amount of chemical agent in the containment tank reaches 500 g, no more supply is allowed to enter the system. Instead, fresh water is input into...
1. (Important: Assume RTS/CTS mechanism is used) Suppose there are two ISPs providing WiFi access in...
1. (Important: Assume RTS/CTS mechanism is used) Suppose there are two ISPs providing WiFi access in the same café, with each ISP operating its own AP. a. If each ISP has configured its AP to operate over the same channel, channel 11. Will the 802.11 protocol completely break down in this situation? Discuss what occurs when two devices, each associated with a different AP, attempt to transmit at the same time. b. Suppose now one AP changes its channel to...
Suppose there are two closed economies: economy a and b. Economy a has a high average...
Suppose there are two closed economies: economy a and b. Economy a has a high average rate of time preference relative to economy B’s low average rate of time preference. (1) describe the differences you would expect to see with respect to interest rates and levels of investment in the two economies. (2) describe what would occur if these countries were open to international capital flows.
Assume an economy with 1000 consumers. Each consumer has income in the current period of 50...
Assume an economy with 1000 consumers. Each consumer has income in the current period of 50 units and future income of 60 units and pays a lump-sum tax of 10 in the current period and 20 units in the future period. The market real interest rate is 8%. Of the 1000 consumers, 500 consume 60 units in the future, while 500 consume 20 units in the future. a) Determine each consumer’s current consumption and current saving
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT