Questions:
QUESTION 1
The elected officials in a west coast university are concerned about the explosive rents being charged to college students. The town council is complementing the imposition of $350 a month on apt in the city. An economist at the university estimates the demand n supply curve as QD= 5600-8p and Qs= 500+4p
Where P is the monthly rent, Q= #of apartments available for propose of analysis can be treated as identical
A) calculate the equilibrium price and quantity that would prevail with price ceiling
B) calculate the producer n consumer surplus at this equilibrium
C) what quantity will eventually be available if the rent ceiling is imposed?
D) calculate the gains or losses in consumer and or producer surplus
E) does the proposed rent ceiling result in net welfare gains? Would you advise the town council to implement the policy
QUESTION 2
John Gardener is the city planner in a med size company. The city is considering a proposal to award an exclusive contract to clear vision inc. A cable television carrier. Mr gardener has discovered that an economic planner hired a year beforehas generated the demand, marginal revenue, total cost and marginal cost functions given below:
P=28-0.0008Q
MR=28-0.0016Q
TC=120000+ 0.00062Q^2
MC=0.0012Q
Where Q is the number of cable subscribers and P= the price of basic monthly service. Conditions change slowly in the community so that john considers the cost and demand functions to be reasonably valid for present condition. John knows relatively little economics and has hired you to answer.
A) assuming clear vision can achieve economies of scale by being the only firm in the industry, wat type of market is CLEAR VISION operating in?
B) what price and quantity would be expected if the firm is allowed to operate completely unregulated?
C) john has asked you to recommend a price and quantity that would be socially efficient. Recommend a price and quantity to John using economic theory to justify your answer.
QUESTION 3
Sarah's pretzel plant has the following short run cost function: C(q,K)= (wq^3)/(1000K^3/2)+50K where q is Sarah's output level, w is the cost of a labour hour and K is the number of pretzels machines Sarah rents. Sarah short run marginal cost curve is MC(q,K=(3wq^2/(1000K^3/2). At the moment, Sarah leases 10 pretzel machines, the cost of labor is $6.85 and she can sell all of the output she produces at $35 per unit.
A) what type of market is Sarah operating in?
B) what is the optimal level of output for Sarah and how much profit does she make at this level?
C) if the minimum wage increases, such as wage per labor hour rises to $7.50, what happens to Sarah optimal level of output and profits?
QUESTION 4
Consider a potential, voluntary exchange between two people. Assume that both have complete info about each other's preferences and that there are no transaction costs. Consumers A and B have between them 9 units of X and 15 units of Y. initially, A has 6 of X and 10 of Y and B has 3 of X and 5 of Y. Consumers A's marginal rate of substitution of X for Y is 2 and B marginal rate of substitution of X for Y is 1/3.
A) is there room for a mutually beneficial, voluntary exchange?
B) if so, determine which consumer would trade for more X and which for more Y
C) if trade takes place! can you explain the terms of trade?