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What can we say about the absolute and relative values of P1, P2 and P3? In what ways will the answer be different if the individual is risk neutral?
Discuss the assertion that input demand of the firm is merely the mirror image of output supply.
If both firms adopt a tit-for-tat strategy, what is the maximum discount rate that is consistent with cartel stability?
Discuss the ways in which the argument will have to be modified if the two parties to the cartel know that they will be facing each other on the same market.
What are the equilibrium levels of output and industry price? How does your answer change if firm 1 has the cost function given in 1(c)?
What is the cartel's profit maximising output and the profit earned? How much will firm 1 sell if it cheats on the cartel?
Discuss the problems that the five suppliers will face in forming and maintaining a cartel.
Suppose that a duopolist holds the following beliefs about the behaviour of a rival. What are the implications of these beliefs for output and price setting?
Analyse the consequences of imposing a profits tax on a revenue-maximising monopolist. In what ways does this reaction differ from that of the profit maximiser?
What is the mark-up of price on average cost? Suppose that the demand curve now shifts out, so p = 20/X2. What happens to the mark-up?
Would that be sufficient to signal quality? Would they be better advised to offer a warranty for labour as well?
Discuss the relative merits of controlling negative external effects such as pollution by setting up markets to internalise the external cost.
Discuss the view that the only tax which the government should use to raise revenue is a poll tax, because it has no effect on economic choices.
Why should airline operators be compensated for the resulting losses by a tax levied on the inhabitants of nearby houses whose amenities are thereby improved?
Why would your preference be influenced by the knowledge that the owners of the firm in question were the otherwise penniless inhabitants of an orphanage?
What assumptions must you make in order to interpret the area under the long-run marginal cost curve as measuring the total cost to society of having the monopo
Under what circumstances will they be at the same point after trading? Will the outcome be Pareto efficient?
Illustrate the process whereby Walrasian auctioneer adjusts real wages in order to find it. Draw the excess demand functions for the goods and labour markets.
Discuss what happens to the transformation curve between the goods if a tax is imposed on the use of one factor in the production of one good?
Explain how the demand for the firm's product affects its choices regarding how much it can sell and the price that it can set for the goods it produces.
What happens to the transformation curve between the goods if a tax is imposed on the use of one factor in the production of one good?
By what mechanism is the condition (mrs = mrt) satisfied in a competitive equilibrium?
If there are N markets in an economy and N - 2 of them are in equilibrium, what does Walras' law imply about the two markets that are not in equilibrium?
Show that any allocation of the coconuts is a point on the contract curve. What is the core of this contract curve? What allocation might you agree?
What is the effect on wages and employment of an increase in the alternative wage?