Assignment:
Questions 1
1. Quarterly demand and supply for the Petram Company is given by Qd = 1000 + 0.5M + 0.25A - 100P and Qs = -750 + 100P, where Q is quantity per quarter, P is price, M is income, and A is advertising expenditure. Suppose that A = 1000 and M =20,000, and answer the following questions.
A. What is the equilibrium price and quantity?
B. What is the inverse demand?
2. Consider the following benefit and cost functions: B(X) = 600X -12X2 and C(X) = 20X2. Use this information to answer the following questions.
- What are the MB and the MC?
- What level of X maximizes the net benefit?
- What is the net benefit (NB)?
3. Consider the market demand and supply given by the following: Qd = 50 - P and Qs = 2.5 + 1.5P. Use this information to answer the following questions.
A. What is the equilibrium price and quantity?
B. If the government sets a price floor of $25, what is the surplus/shortage? If the government buys the surplus, what would be the cost to the government?
Please include the letter for each part of your answer (a, b).
4. Consider a market supply and demand represented by the following: Qs = 4P - 120 and Qd = 1000 - 10P. Use this information to answer the following questions.
A. Calculate equilibrium price and quantity.
B. What is the consumer surplus?
C. If the government imposes an excise tax of $2, what would be the new equilibrium price, quantity?
D. What would happen to the consumer surplus?
Please include the letter with each part of your answer (a, b, c, d).