...ECON-112 Principles of Microeconomics Problem Set #8 (Practice Only)-SOLUTIONS Posted: Wednesday, December 4th, 2013 Due Date: None 1. Mankiw (6th edition), Chp17, Problem 6 (page 370) a. The payoffs are: Your Decision Work You get 15 units of happiness Work Classmate gets 15 units of happiness You get 5 units of happiness Shirk Classmate gets 30 units of happiness Shirk You get 30 units of happiness Classmate gets 5 units of happiness You get 10 units of happiness Classmate gets 10 units of happiness Classmate’ s Decision b. The likely outcome is that both of you will shirk. If your classmate works, you’re better off shirking, because you would rather have 30 units of happiness rather than 15. If your classmate shirks, you are better off shirking because you would rather have 10 units of happiness rather than 5. So your dominant strategy is to shirk. Your classmate faces the same payoffs, so he or she will also shirk. Best responses are in bold. c. If you are likely to work with the same person again, you have a greater incentive to work, so that your classmate will work, and you will both be better off. In repeated games, cooperation is more likely. d. The payoff matrix would become: Your Decision Work You get 15 units of happiness Work Classmate gets 65 units of happiness You get 5 units of happiness Shirk Classmate gets 50 units of happiness Shirk You get 30 units of happiness Classmate gets 25 units of happiness You get 10 units of happiness Classmate gets...
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...:Explain Individual Demand Schedule and Market Demand Schedule ? ANSWER : Demand schedule is the tabular statement of different quantities of a good bought of different prices of a particular moment of time. Demand schedule exhibits the relationship between the amounts of a commodity at different possible prices. Thus a demand schedule shows two columns namely amount demanded of a commodity and their corresponding prices. Demand schedule shows the functional relationship between price quantity combinations. A man never buys a commodity in different amounts at the same prices. He buys more at fewer prices and less at high price. This fact is revealed by demand schedule. A demand schedule is of two types : Individual demand schedule and market demand schedule :- Individual Demand Schedule:- An individual demand schedule shows deferent quantities of a commodity bought by an individual consumer at different possible prices. The reaction of an individual towards the commodities at their corresponding prices is reflected by an individual demand. Figure above showing Individual Demand Schedule and Curve. Market Demand Schedule:- A market demand schedule is the summation of innumerable individual demand schedules for a definite commodity. Each individual consumer has got his own quantity at a particular going price. Thus we can arrive at market demand schedule by combining different schedule of individuals in the market. An Example of a market demand schedule. ...
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...Exchange and Demand Individuals engage in four fundamental activities which reduce the burden of scarcity: exchange, production, specialization, and entrepreneurial activity. Markets and prices facilitate these activities and these activities form the basis of market activity which we study using supply and demand analysis. We will examine voluntary exchange along with a detailed development of the demand curve. We will also, see exactly how pure exchange reduces the burden of scarcity. I. Introduction We will see that the demand curve is the result of individuals making choices constrained by scarcity. Individuals are assumed to be rational, that is, to make choices which maximize their utility, where utility is defined as the want-satisfying ability of the goods consumed. A rational individual chooses from among the possible combinations of goods, that particular combination which maximizes her utility—that which makes her as well-off as possible. The possible combinations from which the individual can choose are limited because of scarcity. In a market economy the individual confronts scarcity in the form of prices, the fact that time is scarce and in the form of limited quantities of goods he or she owns which can be sold to buy other goods. Prices here are the prices of the goods the individual buys and sells, and they include not just prices of consumption goods but also wages, interest, rents, and profits. For most of us the primary good we sell is our labor services,...
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...You will use data from a demand survey to construct demand curves for each firm's data plan. Using demand curves and cost information, you will find each firm's reaction function. A reaction function specifies a firm's profit maximizing price as a function of their competitor's price. You will then solve these equations simultaneously to identify the unique Bertrand-Nash equilibrium in the pricing game. These are the mutual best response prices that the players should charge to maximize profits. (Please refer to the Rivalry in Oligopoly reading for a full description of Differentiated Bertrand competition). 1. Using data from the survey below and Excel's regression feature, estimate the demand curve for each firm. Write down each firm's demand curve. (Hint: Use prices to predict a firm's demand; e.g. demand is of the form: Qatt = a + B1*Patt + B2*Pver) For further details on regression, see reqression tab below (Note: Steps 2-3 are optional challenge steps) Qatt = 164.84 - (7.51*Patt) + (6.23*Pver) Qver = 231.67 + (6.35*Patt) - (7.75*Pver) Note: Please see attached Regression Support 2. Now convert the demand function to a profit function for each firm. Do this by observing that (Patt-Catt)*Qatt = Profit, where Catt is average unit cost. (Please note: Average cost for ATT and Ver is given in Step 5 below) Profit (AT&T) = Qatt*(Patt-Catt) Profit (AT&T) = (164.84 - (7.51*Patt) + (6.23*Pver))*(Patt-Catt) Profit (AT&T) = 7.51*(Patt^2) + 6.23*Patt*Pver - 6.23*Pver*Catt - 7.51*Patt*Catt...
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...w w w e tr .X m eP CAMBRIDGE INTERNATIONAL EXAMINATIONS GCE Advanced Subsidiary Level and GCE Advanced Level e ap .c rs om MARK SCHEME for the October/November 2013 series 9708 ECONOMICS 9708/42 Paper 4 (Data Response and Essays – Supplement), maximum raw mark 70 This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the details of the discussions that took place at an Examiners’ meeting before marking began, which would have considered the acceptability of alternative answers. Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for Teachers. Cambridge will not enter into discussions about these mark schemes. Cambridge is publishing the mark schemes for the October/November 2013 series for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components. Page 2 Mark Scheme GCE AS/A LEVEL – October/November 2013 Section A Syllabus 9708 Paper 42 1 (a) In what type of market structure is Unilever likely to be operating? Explain your answer. [3] It is a large multinational company so the size would indicate that it is in an imperfectly competitive market. This means it has some control over its price decisions, that it has branded products, which implies that it advertises. Allow 1 mark for market economy/mixed economy/diversified...
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...A comprehensive formulation which specifies the factors that influence the demand for the product c. Demand function 3. It is computed when the data is discrete and therefore incremental changes is measurable b. Arc elasticity 4. Goods & services used for final consumption is called b. Consumer goods 5. The curve at which satisfaction is equal at each point c. The Indifference Curve 6. Costs that are reasonably expected to be incurred in some future period or periods a. Future costs 7. Condition when the firm has no tendency either to increase or to contract its output c. Equilibrium 8. Total market value of all finished goods & services produced in a year by a country’s residents is known as b. Gross national product 9. The sum of net value of goods & services produced at market prices b. Product approach 10. The market value of all the final goods & services made within the borders of a nation in an year c. GDP Part II 1. QUESTION :Explain Individual Demand Schedule and Market Demand Schedule ? ANSWER : Demand schedule is the tabular statement of different quantities of a good bought of different prices of a particular moment of time. Demand schedule exhibits the relationship between the amounts of a commodity at different possible prices. Thus a demand schedule shows two columns namely amount demanded of a commodity and their corresponding prices. Demand schedule shows the functional relationship between price quantity combinations...
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...RESEARCH METHODOLOGY Topic:- Analysis of bandwagon effect on youth CHAPTER 1 1.0 Introduction 1.1 Statement Objective: To analyze the factors which create a bandwagon effect on youth and study their effects. 1.2 Why this topic? In 1999 a huge craze being described as Potter mania came into existence following the humungous hype created by the harry potter fans. This led to a huge demand for harry potter books, movies and goodies. Millions of fans waited in lines outside the book stores to get their first copies of the books. These people known as the ‘Potter heads’ created a huge fandom which included both children and adult alike, despite J.K Rolling original marketing the book for children aged 9-12. Thus, here in this research paper we are analyzing the various aspects and factors causing this bandwagon effect esp. among youth. • Why individuals make irrational choices based on the information they receive from others? • Why people decide to ignore their personal information signals and follow the behaviour of others? • What are the major drivers to propel this behaviour? • What common factors are found among such people? What differentiates them from other sections of population. • What are the pronounced effects to be seen? Are they good or not? Etc. In layman’s term the bandwagon effect refers to people doing certain things because other people are doing them, regardless of their own beliefs, which they may ignore or override....
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...the commodity which in simple terms referred as demand. For most of the commodities if prices soar high then people purchase less good hence reducing demand in the same way if supply increases prices go down increasing demand. This basic principle is the basis for the ‘law “of demand which can be described as quantity demand plummets as prices go upward, other variable factors constant. To understand the demand and price relation economists refer demand as schedule of quantities of commodity people want to buy at various prices, other factors constant (Colander, Rockerbie, & Richter, 2006, p.73). Whereas quantity demand is referred as demand of goods at certain price in the demand curve. Ursinus College in Pennsylvania in the year 2000 increased their tuition fee 17.6% to $23,460 in order to increase college revenue and funds to support financial aid which also in turn increased their admissions (Brickley, Smith, & Zimmerman, 2009, p.110). The conjecture of college president is increase in demand is against the law of the demand because of college going student’s snob mentality and their comparison of quality with respect to price. He speculated student’s presumption of costly colleges will have better quality education compared to cheap colleges so demand for their admissions increased. Soon after Ursinus College doing well with their strategy many other colleges increased their tuition fee according to the demand curve it fetched them more admissions as it did in Ursinus...
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...place your name, TA name and section number on top of the homework (legibly). Make sure you write your name as it appears on your ID so that you can receive the correct grade. Late homework will not be accepted so make plans ahead of time. Please show your work. Good luck! Please realize that you are essentially creating “your brand” when you submit this homework. Do you want your homework to convey that you are competent, careful, professional? Or, do you want to convey the image that you are careless, sloppy, and less than professional. For the rest of your life you will be creating your brand: please think about what you are saying about yourself when you do any work for someone else! 1. Consider a monopolist where the market demand curve for the produce is given by P = 520 – 2Q. This monopolist has marginal costs that can be expressed as MC = 100 + 2Q and total costs that can be expressed as TC = 100Q + Q2 + 50. a. Given the above information, what is this monopolist’s profit maximizing price and output if it charges a single price? Answer: MR = 520 – 4Q MC = 100 + 2Q 520 – 4Q = 100 + 2Q Q = 70 units of output P = 520 – 2Q = 520 – 2(70) = $380 per unit of output b. Given the above information, calculate this single price monopolist’s profit. Answer: Profit = TR – TC TR = P*Q = ($380 per unit)(70 units) = $26,600 TC = 100Q + Q2 + 50 = 100(70) + (70)(70) + 50 = $11,950 Profit = $14650 c. At the profit maximizing quantity, what is this monopolist’s...
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...effects the budget forecasting had, management dived into the influential factors that affect sales. For example season trend alerts like decrease in sales in November and December due to low level of end of year inventory. As well as less sales, due to summer plant shut downs. These factor are all effecting the demand and shipment of Treat. The main problem identified was that end of year sales increased due to buildup of inventory, and the reaction to the buildup was as late as two months. We believe that Harman Food’s faces the same challenges that many manufacturers, distributors, wholesales, and retailers due. When manufacturing products there seems to always be tug of war element between production and sales. Pull to strong on one side and the supply demand curve shifts and the same for the other side. The important thing is to identify product and market variables. The variable will be consistent, as the product or market can fluctuate. This will allow for a steady balance. The manager did a good job of identifying all the steps for the product, as well as digging deep into the layers of the forecasting affects and redlining the elements that shift supply and demand. This is the primary step in creating a balance between forecasting and budgeting. Knowing your product trends and market fluxions will helps fill in the blanks for forecasting and budgeting. Aside from this, creating a product and market...
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...2012, Handout 8 Solutions More on Monopolies 1. A monopoly faces a market demand curve given by P = 42 − Q. Its marginal cost curve is given by M C = Q. (a) Find an equation for the marginal revenue curve. Graph market demand, marginal revenue, and marginal cost for this monopoly. Double the slope of the demand curve to get the MR: M R = 42 − 2Q. The graph should show a line twice as steep as the original demand curve, but with the same price intercept. Note: the “double the slope” rule only works when the equation is solved for P! (b) Find the profit-maximizing level of production for this monopolist. M R = M C to get 42 − 2Q = Q ⇒ Q = 14. (c) What price will the monopolist charge? Plug the Q from part (b) into the demand curve: P = 42 − 14 = $28. (d) Is marginal revenue equal to price? Why or why not? Marginal revenue is less than price because the price effect (an increase in price per unit tends to increase total revenue) and the quantity effect (an increase in the price per unit tends to decrease the quantity sold, which lowers total revenue) move in opposite directions. (e) What price would be socially optimal? 1 Econ 101: Intro to Microeconomics Spring 2012, Handout 8 Solutions Socially optimal price where M C = P ⇒ Q = 42 − Q ⇒ Q = 21 ⇒ P = 42 − 21 = $21. (f) What is the monopolist’s total revenue? T R = P ∗ Q = 28 ∗ 14 = 392 2. Suppose a local utility company has a demand curve given by P = 120 − 4Q. TC for firms in this industry is given by T C = 400 +...
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...In business decision making most useful tool is demand and supply. Demand and supply are very broad area in economics. It will talk about very thing in the business. If do not know about the demand and supply, then cannot make a decision on the business. In this easy will discus about the demand and supply and other tools of business decision making. A market is a set of arrangement by which buyers and seller exchange goods and services. Let us look about demand. Demand can be described as the relationship between quantity demanded for a particular good or service in specific circumstance. Also demand is define as the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period. Each of us has an individual demand for particular goods and services and the level of demand at each market price reflects the value that consumers place on a product and their expected satisfaction gained from purchase and consumption. The following example gives a demand curve. Price | | | | | | | | 30 | | | | | | | | | | | | | | | | 20 | | | | | | | | | | | | | | | | 10 | | | | | | | | | | | | | | | | 0 | 2 | 4 | 6 | 8 | 10 | 12 | Quantity | The demand curve shows an estimate about the relationship between the price of any particular product or service and the quantity of that product that will be demanded by consumers. It is usually assumed to slope downward, in the general...
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...evening students. The assessment of the potential joint venture we will determine if there is enough demand as revealed from student surveys, to legitimize the proposal to sell pizzas on each campus each evening in a mutually beneficial fashion. For the university it would allow for students and faculty to dine and work together for the first hour of each class, and for Domino’s the potential gains include larger profits and expanded business opportunity. To collect information, every evening of the week students and faculty were asked to complete a survey to help determine if there is enough demand and how cost points may affect that demand. The demand and forecast for pizza will determine if it is justified to move forward with the proposed joint venture. When completing a demand analysis it is important to test and review the proper demographic and independent variables. In the proposed University-Domino’s joint venture the surveys collected many data points. The demographic variables included students age, number of people in the household, and approximate household income. The independent variables included number of fast food restaurants passed, distance of commute, whether the student is coming to class straight from work, number of times fast food is eaten weekly, amount spent when eating fast food, and if a drink was purchased. The demand function, also known as the curve will specify the relationship between the various price points of pizza and quantity demanded....
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...Bus 640 Problem 1: Patricia is researching venues for a restaurant business. She is evaluating three major attributes that she considers important in her choice: taste, location, and price. The value she places on each attribute, however, differs according to what type of restaurant she is going to start. If she opens a restaurant in a suburban area of Los Angeles, then taste is the most important attribute, three times as important as location, and two times as important as price. If she opens a restaurant in the Los Angeles metropolitan area, then location becomes three times as important as taste and two times as important as price. She is considering two venues, respectively, a steak restaurant and a pizza restaurant, both of which are priced the same. She has rated each attribute on a scale of 1 to 100 for each of the two different types of restaurants. [pic] Show all of your calculations and processes. Describe your answer for each question in complete sentences. a. Which of the two options should Patricia pursue if she wants to open a restaurant in a suburban area of Los Angeles? Calculate the total expected utility from each restaurant option and compare. Graph is not required. Describe your answer, and show your calculations. b. Which of the two options should she pick if she plans to open a restaurant in the Los Angeles metropolitan area? Describe your answer, and show your calculations. c. Which option should she pursue if the probability of finding a...
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...place your name, TA name and section number on top of the homework (legibly). Make sure you write your name as it appears on your ID so that you can receive the correct grade. Late homework will not be accepted so make plans ahead of time. Please show your work. Good luck! Please realize that you are essentially creating “your brand” when you submit this homework. Do you want your homework to convey that you are competent, careful, professional? Or, do you want to convey the image that you are careless, sloppy, and less than professional. For the rest of your life you will be creating your brand: please think about what you are saying about yourself when you do any work for someone else! 1. Consider a monopolist where the market demand curve for the produce is given by P = 520 – 2Q. This monopolist has marginal costs that can be expressed as MC = 100 + 2Q and total costs that can be expressed as TC = 100Q + Q2 + 50. a. Given the above information, what is this monopolist’s profit maximizing price and output if it charges a single price? Answer: MR = 520 – 4Q MC = 100 + 2Q 520 – 4Q = 100 + 2Q Q = 70 units of output P = 520 – 2Q = 520 – 2(70) = $380 per unit of output b. Given the above information, calculate this single price monopolist’s profit. Answer: Profit = TR – TC TR = P*Q = ($380 per unit)(70 units) = $26,600 TC = 100Q + Q2 + 50 = 100(70) + (70)(70) + 50 = $11,950 Profit = $14650 c. At the profit maximizing quantity, what is this monopolist’s...
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