Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 8, Problem 5MC
To determine
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13 sellers and 13 buyers are each willing to buy or sell one unit of a good, with values {$13, $12, $11, $10, $9, $8, $7, $6, $5, $4, $3, $2, $1}. If the market is competitive but the cost of market-making is $4 per transaction, the equilibrium quantity traded in the market is
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8.
1. Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption.
a. Discuss the impact of the good harvest on each of the three markets.
b. Discuss the effect on the markets for each of the three products if the government implements a price restriction in the sugar cane market with the aim of protecting the farmers.
c. How will this impact the revenues for sugar growers, rum producers and whiskey producers?
Chapter 8 Solutions
Managerial Economics: A Problem Solving Approach
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