Which of the following statements is true?

a. Consumer surplus represents the total net benefit to producers from participating in the market.

b. Producer surplus represents the total net benefit to consumers from participating in the market.

c. The producer surplus for the first unit of output produced and sold is equal to the price minus the maximum willingness to pay.

d. The consumer surplus for the first unit of output purchased and consumed is equal to the minimum willingness to accept minus price.

e. Deadweight loss is the reduction in economic surplus resulting from a market not being in equilibrium.

There are more than 500 almond growers operate in areas with rainfall(first firm) and 300 operate in drier areas(second firm). MC in the short run for the first firm is MC(Q) = 0.02 Q and for the second firm in short run MC(Q)= 0.04 Q. Assume that shut down price is 0.

1. Derive the short run market supply for the both firms
2. Assume market demand for almonds is given by the equation Q = 105,000-2500P, derive the equilibrium price and quantity for almonds.
3. In equilibrium, how many almonds will each type of grower produce?

C.M. Burns Enterprises, Inc. is considering investing in a machine to produce computer keyboards. The price of the machine will be $400,000 and its economic life five years. The machine will be fully depreciated by the straight line method. The machine will produce 10,000 units of keyboards each year. The price of each keyboard will be $40 in the first year, and it will increase at 5% per year. The production cost per unit of the keyboard will be $20 in the first year, and it will increase at 10% per year. The corporate tax rate for the company is 34%. If the appropriate discount rate is 15%, what is the NPV of the investment?

C.M. Burns Enterprises, Inc. is considering investing in a machine to produce computer keyboards. The price of the machine will be $400,000 and its economic life five years. The machine will be fully depreciated by the straight line method. The machine will produce 10,000 units of keyboards each year. The price of each keyboard will be $40 in the first year, and it will increase at 5% per year. The production cost per unit of the keyboard will be $20 in the first year, and it will increase at 10% per year. The corporate tax rate for the company is 34%. If the appropriate discount rate is 15%, what is the NPV of the investment?

C.M. Burns Enterprises, Inc. is considering investing in a machine to produce computer keyboards. The price of the machine will be $400,000 and its economic life five years. The machine will be fully depreciated by the straight-line method. The machine will produce 10,000 units of keyboards each year. The price of each keyboard will be $40 in the first year, and it will increase at 5% per year. The production cost per unit of the keyboard will be $20 in the first year, and it will increase at 10% per year. The corporate tax rate for the company is 34%. If the appropriate discount rate is 15%, what is the NPV of the investment?

1. The following two linear functions represent a market (thus one is a supply function, the other a demand function). Circle the answer closest to being correct. Approximately what will suppliers willingly supply if the government controls the market price to be $3.00 (You must first find the market equilibrium price and quantity in order to see how the $3.00 relates to them)? Q = 100 – 4.6P and Q = 75 + 6.2P
Possible answers: 2.3 84.3 86.2     89.3     93.1     93.6 (all close, but approximate)

2. There has been a change in the market (represented in 1 above). The change is represented by the following two equations. Circle the one correct conclusion that describes the market change. Q = 90 + 6.2P   and Q = 110 – 4.6P
Possible Answers: a. demand has decreased,  b. demand has increased, c. supply has decreased, d. supply has increased, e. supply has decreased and demand has decreased, f. supply has increased and demand has increased

3. Circle the function on the answer sheet that represents the marginal revenue (MR) function for this demand function: Q = 75 – 7P
Possible Answers: a. MR=19.57-.044Q, b. MR=21.74-.044Q, c. MR=26.09-.044Q, d. MR=33.33-.066Q, e. MR= 30.00-0.4Q, f. MR=10.71-0.28Q

4. Circle the quantity that maximizes total revenue (TR) for the marginal revenue (MR) function selected in number three (3).
Possible Answers: 38.25   44.48   49.41   50.50   59.30   75.00

5. If supply decreases but demand remains the same, we can conclude that the new equilibrium:
Possible Answers: a. Price must fall but market quantity is indeterminate.    b. Quantity must increase but market price is indeterminate.   c. Price must increase but market quantity is indeterminate.   d. Quantity must decrease but market price is indeterminate.   e. Price must increase and Quantity must increase.     f.   Price must increase and quantity must decrease.

Please show work on how you solved the questions.

The information below will be needed to answer all questions.

1. The following is a simplified duopoly model of competition between two firms. Each firm is restricted to producing 25, 35, 50 or 100 units of output. The details of how the payoffs are derived are unimportant because payoffs are all given in the table below.

                                                                                  FIRM 2

1. Now assume that FIRM 1 is the Stackelberg leader in this market. And FIRM 2 is the follower. Being the leader, FIRM 1 makes the first move in choosing the quantity of output, followed by FIRM 2. Draw the extensive form or the game tree for this sequential form game.

2. Using the game tree, now determine the sub-game perfect Nash equilibrium(s). Describe the process that helps you in determining it.

Using the equations shown below, answer the following questions.

QD = 100 – 2P

QS = –20 + 2P

a.  What is the equilibrium price and quantity in this market? Show it graphically.

b.  Calculate the consumer surplus and producer surplus? Show them graphically.

c.  Assuming a tax of $10 is imposed on the seller side, what is the equilibrium price and quantity after the tax?

d.  Calculate the deadweight loss and total surplus and show them graphically.

Create the supply and demand graph in the space below. Also identify the price and quantity at which equilibrium exists. This information is important for the client to determine the quantity of oil to produce for profit maximization. Identify this information on the supply and demand graph you created below.