Suppose that in the market for coffee, the government decides to impose a tax on the consumption of coffee.
Illustrate the equilibrium market for coffee reflecting the new tax.
On your graph, label the new price that consumers pay as Pc
On your graph, label the new price that sellers receive as Ps
On your graph, shade in the area representing the tax revenue received by the government and label it (TR).
On your graph, shade in the area of consumer surplus and label it (CS).
On your graph, shade in the area of producer surplus and label it (PS).
On your graph, shade in the area of deadweight loss, if any and label it (DWL).
What does deadweight loss mean?
In: Economics
1. Suppose we have the following supply and demand curves. QD = 500 − 2PD QS = 100 + 2PS
a) Determine the competitive equilibrium for this market.
b) Suppose that we impose a per unit tax of $50 on this market. Determine the following: 1. The price that sellers receive. 2. The price that consumers pay. 3. The number of units sold given the tax.
c) What is the share of the burden borne by consumers? What is the portion of the tax borne by sellers? Think the incidence formula.
d} Determine if the following statement is either True or False: The value of dead weight loss is equal to one-half the amount of tax revenue that is collected.
In: Economics
Demand: P = 100 – 10Q
Supply: P = 10Q
In: Economics
Question 12
Which pricing rule generates the greatest welfare for society?
| A | marginal cost |
| B | fixed cost |
| C | variable cost |
| D | average cost |
| E | total cost |
Question 13
A firm’s willingness to supply its product in the long run is represented on a graph by the
| A | marginal revenue (MR) curve. |
| B | part of the marginal cost (MC) curve above minimum average variable cost (AVC). |
| C | market supply curve. |
| D | part of the marginal cost (MC) curve above minimum average total cost (ATC). |
| E | entire marginal cost (MC) curve. |
In: Economics
Suppose, at a given point in time, Chez Rachael is a non-price discriminating monopolist selling ratatouille and is producing its profit-maximizing level of output. Suppose further that at this level of production, Rachael's average fixed cost of producing ratatouille is $2, her average total cost is $10, and her marginal cost is $12.
At her current level of production, what is…
a) Rachael’s average variable cost of producing ratatouille?
b) Rachael’s marginal revenue from selling ratatouille?
c) the price of ratatouille?
d) Rachael’s profit from selling ratatouille?
Will Rachael continue to produce ratatouille in the long run? Why or why not? Explain verbally.
In: Economics
Suppose there is a monopolist in the market for a specific video
game facing a demand curve: P = 20 - 0.5Q. The monopolist marginal
cost curve is MC = 4, its total variable costs are TVC = 4Q and it
faces a total fixed costs equal TFC = $78.
Note: Keep as much precision as possible during
your calculations. Your final answer should be accurate to at least
two decimal places.
a) Graph the demand curve and marginal cost curve,
then derive and graph the marginal revenue curve.
b) Calculate the equilibrium monopoly quantity and price.
c) What is the profit for the monopoly?
d) What is the consumer surplus?
In: Economics
41. A monopolist has a constant marginal and average cost of $10
and faces a demand curve of QD = 1000 – 10P.
Marginal revenue is given by MR = 100 – 1/5Q.
a. Calculate the monopolist’s profit-maximizing quantity, price,
and profit.
b. Now suppose that the monopolist fears entry, but thinks that
other firms could produce the product at a cost of $14
per unit (constant marginal and average cost) and that many firms
could potentially enter. How could the monopolist
attempt to deter entry and what would the monopolist’s quantity and
profit be now?
c. Should the monopolist try to deter entry by setting a limit
price?
In: Economics
Assume that the market for patio chairs is a
monopoly and charges each consumer the same price for patio chairs.
producers have the same cost situation:
• The labor and raw material expense of producing additional units
of patio chairs for every factory is constant at $10 and equal to
average total costs. Assume this is the long run, so fixed costs
are equal to zero. Per-period market demand for patio chairs is
stable, and described by the data in the following equation: P =
105 – 0.025Q
b) Given market demand, marginal revenue, and cost conditions,
what market quantity and price will the monopoly select in order to
maximize profit?
Price:_________________________
Quantity:_____________________________
In: Economics
Larkspur Company lost most of its inventory in a fire in
December just before the year-end physical inventory was taken.
Corporate records disclose the following.
| Inventory (beginning) | $ 80,000 | Sales revenue | $410,800 | ||||
| Purchases | 295,700 | Sales returns | 21,200 | ||||
| Purchase returns | 28,300 | Gross profit % based on net selling price | 38 | % |
Merchandise with a selling price of $30,600 remained undamaged
after the fire, and damaged merchandise has a net realizable value
of $8,300. The company does not carry fire insurance on its
inventory.
Compute the amount of inventory fire loss. (Do not use the retail
inventory method.)
| Inventory fire loss |
$ |
In: Accounting
On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date?
Multiple Choice
Debit Notes Payable $7,500; credit Interest Expense $150; credit Cash $7,350.
Debit Notes Payable $7,500; credit Cash $7,500.
Debit Notes Payable $7,650; credit Cash $7,650.
Debit Notes Payable $7,500; debit Interest Expense $150; credit Cash $7,650.
Debit Cash $7,650; credit Interest Revenue $150; credit Notes Receivable $7,500.
In: Accounting