3. Consider the Smith family who have the following demand for rental housing (q, measured in square feet): q=0.5*(y/p), where y is the Smith family income and p is the price of housing per square foot. The Smith's income is $4000 per month and initially the price of housing is $2 per square foot per month. a. If the Smiths are operating on their demand curve, how much housing are they consuming?
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- Question 1 Consider ten students who think about rent- ing an inner ring (IR) apartment in College Town. Their reservation prices (in no particular order) are 250, 280, 300, 420, 240, 380, 260, 440, 480, and 400, respec- tively. Suppose the supply of IR apartments is fixed at N = 6, and all landlords have reservation prices of zero. a) Plot an ordered list of the students' RPs in a diagram. b) Plot the (inverse) market demand curve, and the (inverse) market supply curve in a diagram. Explain why your plot in a) is identical (except for the labelling of the vertical axis) to your demand plot in b). c) Find the market equilibrium. How many IR apartments are rented out in a competitive equilibrium? To whom? At which price(s)? Explain.Jackistheowneroftheonlylocalbarinasmalltown.Hesellswhiskeyin one-ounce glasses. For simplicity, let’s assume it doesn’t cost Jack anything to run his business. There are two customers, Adam and Burt who are twin brothers. Adam’s demand function is yA = 16 – 2p, and Burt’s demand function is yB = 8 – p (price is measured in dollars and quantity is measured by ounces). Jack knows their demand functions, but the problem is that he cannot tell them apart since they look exactly the same to him. To increase his profits, Jack offers the following two options that his customers can choose from: (1) You can pay $T1 up front and drink as much as you want; or (2) Pay $T2 up front and the price per ounce of whiskey will be $p. 1.a If p = 4, what is the maximal T2 that Jack can charge so that Burt is willing to come to the bar? 1.b What is the maximal T1 that Jack can charge so that Adam will choose the first pricing option?6. Exercise 4.6 An econometrician hired to analyse a local golf course has determined that there are two types of golfers, the regular and the occasional. The annual demand for games from regular players is given by QH = 24 - 0.3P, where P is the price of a round of golf. On the other hand, the annual demand for occasional items is given by Q° = 10 - 0.1P. The marginal cost and the average total cost per item are equal to €20. a) If you could distinguish between regular and casual players, what price would be set for each type? How many games would each type of player play? How much profit could the golf course generate? Represent graphically. b) As an alternative to the discrimination of third degree prices, those in charge consider a double tranche rate according to which the members can play as many games as they wish at a price of € 20 per game. How much profit will the golf course generate if it charges all players the same annual fee for becoming a member of the club? What if you…
- 3.In Avenger City, there are various fried chicken consumers withFea es like Captain America, Thor and Black panther. Consumers with Characteristics of Captain America has a demand function for fried chicken with DCA(p)=10-2p, while Thor is DT(p)=5-p and Black Panther is DBP(p)=20-4p. The number of consumers with characteristics such as Captain America is 50, Thor 100 and Black Panther 150. If the price of Fried Chicken is $5, then:A. What is the total demand for fried chicken for consumers withFeatures like Captain America?B. What is the total demand for fried chicken for consumers withFeatures like Thor?C. What is the total demand for fried chicken for consumers withFeatures like Black Panther?D. What is the total demand at market level for fried chicken whenthe price is $5? If the price of fried chicken is $10, then:A. What is the total demand for fried chicken for consumers withFeatures like Captain America?B. What is the total demand for fried chicken for consumers withFeatures…2. The demand curve facing a competitive firm The following graph illustrates the market for large moving trucks in Eugene, OR, during Oregon's fall move-in week. PRICE (Dollars per large truck) 400 360 320 Demand 280 240 200 8 160 120 80 40 0 1 3 4 5 6 7 8 QUANTITY (Hundreds of large trucks) 2 Supply + 9 10 (2)The garment producer faces the inverse demand function PG = 300 - 2G, where PG is the price of garment and G is the quantity of garment. For simplicity, assume that the garment producer has no other cost of production, other than the price per unit of electricity it pays to the electricity producer. 2 Suppose that the electricity producer and the garment producer interact as fol- lows. First, the electricity producer sets a price PE that the garment producer must pay for each unit of electricity. Then the garment producer decides how much elec- tricity to purchase from the electricity manufacturer and how much garment G to produce and sell. (i) Suppose that the marginal cost of a unit of electricity is $10 per unit and every unit of garment requires two units of electricity. Find the profit maximizing prices and quantities of electricity and garment, PE, PG, E and G. What is the profit of each firm? What is the total profit? (ii) Now suppose that the two firms merge together, i.e., the…
- Homework(Ch 15) 7. Price discrimination and welfare Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph sho the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $30 per pair of Ooh boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamon symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the…Aruna owns Pottery Plus, a small firm that produces terra cotta pots for sale in the Edmonton area. The graph below shows Aruna's demand curve. Price ($) 40 36 32 28 24 20 16 12 8 4 0 4 8 12 16 20 24 28 32 36 40 Quantity per periodJoe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is p=140-2q, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good. idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $20, which is the marginal cost his round imposes on the Club. Joe marries Susan, who is also an enthusiastic golfer. Susan wants to join the Northlands Club. The manager believes that Susan's inverse demand curve is p=120-2q. The manager has a policy of offering each member of a married couple the same two-part prices, so he offers them both a new deal. What two-part pricing deal maximizes the club's profit? Will this new pricing have a higher or lower access fee than in Joe's original…
- 3. A firm is considering bidding for the franchise to sell cola and hot dogs at a baseball stadium. It estimates the demand functions for cola and hot dogs respectively as De=20-4pc-PH DH = 15-Pc-5PH where De is demand for cola in thousands (of cans), DH is demand for hot dogs in thousands, pc is the price of a can of cola in dollars, and PH is the price of a hot dog. The unit cost of supplying a hot dog is constant at $0.1, and the unit cost of a can of cola is likewise constant at $0.5. (a) Find the upper limit to the amount the firm would bid for the franchise.1. Given the demand function for beef is Qx= 300-10 0Px+60Pp+0.01Y, where Qx is the tons of beef demanded in your city per week, Px is the pric e per pound of beef, Pp is the price per pound of pork, and Y is the average household income in t he city. The supply of beef function is Qx= 200+150P-30C, where Qx is the tons of beef supplied in your city per week, Px is the price of beef per pound, and C is the cost of feed for cows. Assume initially, the price of pork (Pp) is $3 per pound, Y=$50,000, and C=$5. a. Find the demand function Qd the given price of p ork (Pp) and income (Y) and find the supply function at the given cost of feed per pound (C). b. What is the equilibrium price per pound and quan tity demanded of beef? c. What is price elasticity of demand for beef? Is the demand for beef price elastic d. As the manager of the beef business, should incr ease or decrease the price of beef if objective is to increase your operating revenue? e. What is the cross-price elasticity…12 Jim's Camera shop sells two high-end cameras, the Sky Eagle and Horizon. The demands and selling prices for these two cameras are as follows. Ds = demand for the Sky Eagle Ps= selling price of the Sky Eagle DH = demand for the Horizon PH = selling price of the Horizon = 223 - 0.60P + 0.35PH DH=270+ 0.10P - 0.64PH Revenue Ds The store wishes to determine the selling price that maximizes revenue for these two products. Develop the revenue function R (in terms of Ps and PH only) for these two models, and find the revenue maximizing prices (in dollars). (Round your answers to two decimal places.) Price for Sky Eagle Price for Horizon Optimal revenue R = PS = $| PH = $ R = $