The aggregate supply curve A) is a market supply curve. B) relates output with the price level. C) embodies the same logic that lies behind an individual firm's supply curve. D) is the sum of the individual supply curves in the economy

December, 2006, was a difficult month for Colorado’s beef industry.  Multiple heavy snow storms caused thousands of beef cattle to be stranded in nose-high snow drifts.  They could not get food or water for themselves.  In spite of valiant attempts by the National Guard to drop hay, many died.  Beef market prices in the spring were predicted to rise.  The series of unfortunate events continued:  after the spring thaw, Colorado cattlemen experienced a couple of cases of mad-cow disease.  Beef market prices fell (contrary to the earlier prediction).  Diagram in (a) the initial impact of the bad winter on the price and quantity.  Then, on the same grid, incorporate the impact on price and quantity of the mad-cow cases.  Be sure that your final diagram indicates a market price decrease.  Using economic terminology, write a statement in (b) explaining the results of your graphical analysis in (a).   a) GRAPHICAL ANALYSIS                   b) WRITTEN

Two software companies sell competing products. These products are substitutes so that the number of units that either company sells is a decreasing function of its own price and an increasing function of the other product’s price. Let P1 and X1 be the price and quantity sold of product 1, and P2 and X2 the price and quantity sold of product 2. We have that  and . Each company has incurred a fixed cost for designing their software and writing programmes, but the cost of selling to an extra user is zero. As the firms compete in prices, each company will choose a price that maximises its profits.   Explain why the price that maximises each company’s profits is the same as the price that maximises its total revenue.   Write an expression for the total revenue of each company as a function of it its price and the other company’s price.     Company’s 1 best response function BR1(P2) is the price of product 1 that maximises its profits given the price of product 2 is P2. Similarly,…

Suppose you are the manager of a California winery. How would you expect the following events to affect the price you receive for a bottle of wine? The price of comparable French wines decreases. One hundred new wineries open in California. The unemployment rate in the United States decreases. The price of cheese increases. The price of a glass bottle increases significantly due to new government antishatter regulations. Researchers discover a new wine-making technology that reduces production costs. The price of wine vinegar, which is made from the leftover grape mash, increases. The average age of consumers increases, and older people drink less wine.