The X-Corporation produces a good (X) that is a normal good. Its competitor, Y-Corp. makes a substitute good that it markets under the name (Y). a. How will the demand for good X change if consumer incomes decrease? b. How will the demand for good X change if the price of good Y increases?
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1. The X-Corporation produces a good (X) that is a normal good. Its competitor, Y-Corp. makes a
substitute good that it markets under the name (Y).
a. How will the
b. How will the demand for good X change if the
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- Which is most likely the result of healthy competition in the market?1. There are two brands of cigarettes X, Y. The demand for each is as follows: Qx = 80 - 2p Qy = 60 - 0.5p Assume that the marginal cost of producing cigarette X is $10, the marginal cost of producing cigarette Y is $8, and that the market for both cigarettes is perfectly competitive. Assume that each pack of cigarette X smoked does $5 worth of health damage to the smoker, and a total of $4 worth of health damage to the smoker’s neighbors via second-hand smoke. Each pack of cigarette Y smoked does $6 worth of health damage to the smoker, and $5 health damage to the smoker’s neighbors. (a) Explain why the public supply curves differ from the private supply curves, and how this represents the externality from second-hand smoke. Highlight the area(s) of your diagram that represents a social loss. (b) Calculate the social loss for both. (c) Suppose the government decides to pursue a Pigouvian solution to eliminate social loss. What's amount of tax or subsidy would the government…1. There are two brands of cigarettes X, Y. The demand for each is as follows: Qx = 80 - 2p Qy = 60 - 0.5p Assume that the marginal cost of producing cigarette X is $10, the marginal cost of producing cigarette Y is $8, and that the market for both cigarettes is perfectly competitive. Assume that each pack of cigarette X smoked does $5 worth of health damage to the smoker, and a total of $4 worth of health damage to the smoker’s neighbors via second-hand smoke. Each pack of cigarette Y smoked does $6 worth of health damage to the smoker, and $5 health damage to the smoker’s neighbors. (a) Plot the private demand curve and private supply curve for both cigarettes on separate axes. (b) What is the privately efficient quantity demand of both cigarettes? (c) Add the public supply curves to the graphs you plot in (a). (d) What is the socially efficient quantity demand of both cigarettes?
- a. Demand for good Q is estimated to be Q = 14 - P, where P is price. If the prices rises from P = $3 to P = $6, then the lost revenue due to the quantity effect is b. A firm selling a product Q faces a demand where Q = 24 - P, where P is price. If the firm lowers the price from P = $20 to P = $16, then the lost revenue due to the price effect isA. “There is constantly a shift in supply and demand curves and markets are never at equilibrium. As a result, there is no purpose of the concept of equilibrium.” Do you agree/disagree with this statement. B. Resorts give discounts to individuals who book in advance and stay over a weekend. Individuals who book at the last minute and do not stay over a weekend usually pay full price. Explain the difference between the two groups’ demand for resorts and the resorts’ pricing decisions?2. There are two brands of cigarettes X, Y. The demand for each is as follows: Qx = 80 – 2p Qy = 60 – 0.5p Assume that the marginal cost of producing cigarette X is $10, the marginal cost of producing cigarette Y is $8, and that the market for both cigarettes is perfectly competitive. Assume that each pack of cigarette X smoked does $5 worth of health damage to the smoker, and a total of $4 worth of health damage to the smoker's neighbors via second-hand smoke. Each pack of cigarette Y smoked does $6 worth of health damage to the smoker, and $5 health damage to the smoker's neighbors. (a) Plot the private demand curve and private supply curve for both cigarettes on separate axes. (b) What is the privately efficient quantity demand of both cigarettes? (c) Add the public supply curves to the graphs you plot in (a). (d) What is the socially efficient quantity demand of both cigarettes?
- What is the market price? What is the profit-maximizing output? What is total revenue at the profit-maximizing output?a. . Coca-Cola cuts its price below that of Pepsi-Cola to increase profit. b. A Single firm, protected by a barrier to entry, produces a personal service that has no close substitutes c. barrier to entry exists, but the good has some close substitutes d. A museum offers discounts to students and seniors e. A firm can sell any quantity it chooses at the going price f. A firm experiences economics of scale even when it produces the quantity that meets the entire market demand. 1. Which of the six cases are monopolies or might give rise to monopoly? 2. which are legal monopolies and which are natural monopolies? can any of them price discriminate? if so, why? 3. What are the distinguishing features of oligopoly? 4. Why are breakfast cereals made by firms in oligopoly? Why isn't there monopolistic competition in that industry? 5. Business Week reported that Energizer is gaining market share against competitor Duracell and its profit is raising despite the sharp rise in the price of zinc,…Question 18 Alex Potter owns the only well in a town that produces clean drinking water. He faces the following demand P=200-2Q, and marginal cost MC=50+2Q, marginal revenue MR= 200-4Q curves. In order to maximize profits, Alex should charge a price of $150 at the profit maximizing quantity with a marginal revenue equal to $150. $100 at the profit maximizing quantity with a marginal revenue equal to $150. $100 at the profit maximizing quantity with a marginal revenue equal to $100. $150 at the profit maximizing quantity with a marginal revenue equal to $100. O O
- Ilsia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price. a. The most likely reason that the price is the same is that drivers need gas and are willing to pay whatever price a gas station charges. consumers view gasoline from different gas stations as perfect substitutes. government regulation requires both gas stations to charge the same price. gas stations always make a profit, so they can charge any price they want. b. If one station increases its price, it will make a higher profit. it will lose customers to the cheaper station across the street. it will be fined by the government. it will sell more gasoline.Competition determines market price because the more that toy is in demand (which is the competition among the buyers), the higher price the consumer will pay and the more money a producer stands to make. ... Greater competition among sellers results in a lower product market price.You live in a town with 300 Adults and 200 children, and you arc thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customer: a. To maximize profit, what price would you charge for an adult ticket? For a child's ticket?How much profit do you make?b. The city council passes a law prohibiting you from charging different prices to different customers. What price do you set for a ticket now? How much profit do you make?c. Who is worse off because of the law prohibiting price discrimination? Who is better off? (If you can, quantify the changes in welfare.)d. If the fixed cost of the play were $2,500 rather than $2,000, how would your answers to parts (a), (b), and (c) change?
