Suppose the demand for standard sized bottled water in the US is Qd=120-30.5P where Qd is monthly quantity demanded in millions and P is the price per bottle in dollars and cents. If the marginal private cost (MPC) of producing the bottled water is one dollar, calculate the market equilibrium quantity. Explain what a constant marginal cost implies. Does that mean the total opportunity cost of producing bottled water is unrelated to how many are produced?
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- Suppose the demand for standard sized bottled water in the US is Qd=120-30.5P where Qd is monthly quantity demanded in millions and P is the price per bottle in dollars and cents.
- If the marginal private cost (MPC) of producing the bottled water is one dollar, calculate the market
equilibrium quantity . - Explain what a constant marginal cost implies. Does that mean the total
opportunity cost of producing bottled water is unrelated to how many are produced? - Let’s assume that the marginal private benefit (MPB) of bottled water equals the marginal social benefit (MSB). Explain what that means.
- At the equilibrium calculated in part A, what do you know about buyers’
willingness to pay in each transaction?
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- Take this hypothetical situation: Suppose that the supply side of the market for for electric energy is comprised of two sellers: Seller 1 and Seller 2. Let P be the price of one unit of electric energy, and Q be the quantity of electric energy. Seller 1 owns a hydropower factory with a constant marginal cost of $3 and can produce a maximum of 10 units of electric energy. In addition, the hydropower plant has a requirement of a minimum of 3 units of electric energy. Seller 2 owns a solar factory to produce electric energy. This factory has a constant marginal cost of $5 and can produce a maximum of 5 units of electric energy. A) With this given information, please sketch the market supply by aggregating the two individual supplies. Please label the graph clearly for slopes, kinks, intercepts, etc. B) Suppose that the price of geothermal increases. On the graph drawn in part A, show precisely how the supply curve changes. C) Suppose that the price of geothermal increases. In a market…Consider an urban highway that is subject to traffic congestion. The average cost of travel per mile on that highway is (in cents): AC= 10 + 4T, where Tis traffic volume per hour, measured in 100s of vehicles per hour. For example, if T = 500 cars per hour, AC = 30 cents per mile. Assume that the demand for traffic per hour (during rush hour) is T = 46 – P, where P is the "price" paid by the driver. а. Assume that no congestion toll is imposed. Compute equilibrium T and P. b. Assume that it is possible to impose the efficient congestion toll. Find the toll, and the efficient levels of T, P, and AC.Consider the competitive market for production of a chemical as shown in the diagram below. This setup will apply to this question and the next two questions. P ($/gallon) Demand: P=220-Q/100 0 Supply: P = Q/400 Q (gallons) Production of this chemical produces noxious odors that impact the health of the communities surrounding the production facilities. It is well known that every gallon produced increases health costs in society, but there is a lot of argument over how much health costs increase. In reality the number is that health costs increase by $3 per gallon produced, but that it hard to discover. If the government does not intervene in this market, what will be the total surplus for society in this market (including the $3 per gallon health costs)? Please do not round at any step of any calculation. Do not round your final answer.
- Suppose that pig farming in a region is a perfectly compet- itive industry. However, one negative consequence of this activity is that it creates water pollution that adversely affects the health of the residents in the nearby communities that rely on the water sources that are contaminated by the pig farms. The market supply curve for pigs (or hogs) is given by H^S = 6p where H^S is the quantity of hogs supplied to the market by farmers in this region. The market demand for hogs is given by H^P = 300 – 4p. The government estimates that the additional medical costs (M) imposed on the nearby communities is given by M = 5H, where H is the quantity of hogs produced and sold in the market. Q: In the absence of clearly defined property rights over water use or con- ventions or some form of government intervention, derive the market equilibrium for hogs and the DWL resulting from the additional medical costs associated with hog production. Please show the formula, thank you.Suppose that managers at Honda are deciding how to price the new Honda Accord. The managers estimate that their total costs increase by $20,000 for each car they produce. They also estimate the demand curve they face; it is described by the equation: Q = -0.4 P + 16,000, where Q represents the quantity of Honda Accords they will sell and P represents the price they charge in US dollars. We can re-write that demand curve as: P = 40,000 - 2.5 Q. Take every possibly quantity that the managers might choose between and 7,000 in units of 100. For each possible quantity, calculate the associated price the managers would need to charge, the revenue they would earn, and the total costs. You can then calculate profits for each level of quantity. Highlight the cell that contains the highest value of profit. Finally, you can also approximate marginal revenue here as the change in total revenue after the next 100 cars are produced. At what quantity does marginal revenue roughly equal marginal cost?…Suppose that managers at Honda are deciding how to price the new Honda Accord. The managers estimate that their total costs increase by $20,000 for each car they produce. They also estimate the demand curve they face; it is described by the equation: Q = -0.4 P + 16,000, where Q represents the quantity of Honda Accords they will sell and P represents the price they charge in US dollars. We can re-write that demand curve as: P = 40,000 - 2.5 Q. Take every possibly quantity that the managers might choose between 0 and 7,000 in units of 100. For each possible quantity, calculate the associated price the managers would need to charge, the revenue they would earn, and the total costs. You can then calculate profits for each level of quantity. Highlight the cell that contains the highest value of profit.
- The average cost of landscaping services for members of a condominium community is $350 per week. Assume that the quantity of landscaping services is perfectly correlated with the number of gardeners per week. Suppose the community consists of seven residents, each with the identical marginal benefit curve for landscaping services. The marginal benefit of the first gardener is $100 per resident. a) How many gardeners would be hired if their services were sold in a market to individual buyers at a price of $350 per week? Explain why the market arrangement is inefficient.Suppose there are three types of consumers who attend concerts at your university's performing arts center: students, staff, and faculty. Each of these groups has a different willingness to pay for tickets; within each group, willingness to pay is identical. There is a fixed cost of $1,000 to put on a concert, but there are essentially no variable costs. For each concert: • . There are 150 students willing to pay $20. There are 220 staff members willing to pay $35. There are 100 faculty members willing to pay $50. a. If the performing arts center can charge only one price, what price should it charge? b. What are profits at this price? c. If the performing arts center can price-discriminate and charge two prices, one for students and another for faculty/staff, what are its profits? d. If the performing arts center can perfectly price-discriminate and charge students, staff, and faculty three separate prices, what are its profits?Question #3. Assume the annual aluminum can market is characterized by a demand curve represented by the linear equation: P = -15Q + 1200. Assume also that aluminum cans are produced using both virgin and recycled material. The supply curve for cans made from recycled material is represented by the equation: P = 5Q + 50. The supply curve for cans made from virgin material is represented by a constant marginal cost of $250. What is the total equilibrium quantity of aluminum cans produced in this market? How many cans would be produced with recycled material? How many cans would be produced using virgin material? What is the recycling ratio in this market? What would be the new recycling ratio if the government decides to levy a flat tax of $10 on virgin material? Who would benefit from this type of tax? Explain your answer.
- Based on market research, a film production company in Ectenian obtains the following information about the demand and production costs of its new DVD:Demand: P = 1,000 – 10QTotal Revenue: TR = 1,000Q – 10Q2Marginal Revenue: MR = 1,000 – 20QMarginal Cost: MC = 100 + 10Qwhere Q indicates the number of copies sold and P is the price in Ectenian dollars.d. Suppose, in addition to the costs above, the director of the film has to be paid. The company is considering four options:i. A flat fee of 2,000 Ectenian dollarsii. 50 percent of the profitsiii. 150 Ectenian dollars per unit soldiv. 50 percent of the revenueFor each option, calculate the profit-maximizing price and quantity. Which, if any, of these compensation schemes would alter the deadweight loss from monopoly? ExplainAssume you are a single seller of mugs and each buyer’s willingness to pay is below. Assume you incur a cost of $5.00 per unit. (i.e., the marginal cost is constant). How many mugs would you need to sell if you intend to maximise profits, how many mugs would this seller supply to the market, and what price would you charge? Remember, the price has to be the same for each unit sold Buyer Willingness to pay ($) for one mug Bobby 18.00 Jake 16.00 Tara 9.00 Phillip 4.00Question 1: Microsoft sells two types of office software, a word processor it calls Word, and a spreadsheet it calls Excel. Both can be produced at zero marginal cost. There are two types of consumers for these products, who exist in roughly equal proportions in the population: authors, who are willing to pay $120 for Word and $40 for Excel, and economists, who are willing to pay $50 for Word and$150 for Excel. a. Suppose that Microsoft execs decide to sell Word and Excel separately. What price should Microsoft set for Word? (Hint: Is it better to sell only to authors, or to try to sell to both authors and economists?)What price should Microsoft set for Excel?What will Microsoft’s profit be from a representative group of one author and one economist?b. Suppose that Microsoft decides to bundle together Word and Excel in a package called Office, and not offer them individually. What price should Microsoft set for the package?How much profit will Microsoft generate from a representative…