Suppose the equation for the demand curve in a market is P=100-1.5QD, where Qp is the quantity demanded and P is the price. Also, suppose the equation for the supply curve in the same market is P=0.5Qs , where Qs is the quantity supplied. Suppose there is an external cost of $8 associated with the production of each unit of the good. What is the socially optimal quantity, and how much is the social cost at this quantity? P=$31; Q=46 P=$22; Q=44 O P=$25; Q=50 O P=$37; Q=50
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- A two-good economy is in a competitive equilibrium. The price of a piece of candy is $2 andthe price of a desk is $12. The marginal cost of candy is given by MCc = 2Qc and the marginalcost of a desk is MCd = 4 + 4Qd. The current production level of candy is one piece. What is theoutput of desks? A) Qd = 1B) Qd = 2C) Qd = 4D) Qd = 5Consider a society consisting of just a farmer and a tailor. The farmer has 30 units of food but no clothing. The tailor has 60 units of clothing but no food. Suppose each has the utility function U=Fc, If the price of clothing is always $1, and the food price is currently $1, then we can conclude O the market is at a competitive equilibrium. the price of food will drop towards a contitive equilibrium. the price of food will increase towards a competitive equilibrium. O None of the above..Consider a Robinson Crusoe Economy. There are two commodities in the economy: one is labor L and the other is yam y. The producer Crusoe has production technology of y = Lî. The consumer Crusoe's preference is represented by y(1 – L)¿ where L is the supply of labor. The consumer Cruose has all the share of the producer Crusoe's profit. (a) Find efficient allocation (L, y). (b) Define and calculate a competitive equilibrium of the economy. (Normalize the wage to be unity, i.e., w = 1).
- true or false - explain in short be supported with an economic model. If the demand for and supply of a product both increases, the equilibrium quantity of the product must also increase. If the demand for a product decreases and the supply of the product increases, the equilibrium price of the product may increase or decrease, depending on whether supply or demand has shifted more. Assume that there is a fixed supply in the market. A higher price will result from a change in demand brought about by a rise in income.Elsa lives alone on an island with two goods, bananas and fresh water. Her utility function is U = 4BW where B is the amount of bananas she consumes and Wthe amount of water. Her production function for bananas is B=Lg where Lg is the amount of labour time she devotes to bananas. Her production function for water is W = Lwwhere Lwis the amount of labour time she devotes to water. If the total time she has available is 70, what should she do to maximize her utility? (Enter your answers in whole numbers.) LB= Lw=[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…
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