Price Theory HW4 answers

Price Theory HW4 answers - Skelton Eco 3301 Homework 4...

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Skelton Eco 3301 Homework 4 Answers 1. A)This increases MC, so it will impact price. B)This is equivalent to part A; either one increases (marginal) production costs, so price is affected. C)This is a fixed cost, so it has no impact unless it drives the business to shut down. D)This is different than part C because it impacts all restaurants. So, for Upton, it could cause him to shut down. Also, if it causes other restaurants to close, then it would increase the demand for Upton’s restaurant and allow him to raise prices. E) This cost is sunk so will have absolutely no impact on the restaurant. F) This will cause a decrease in demand and therefore quantity and price will fall as well (along with marginal revenue). 2. If the benefits are still $1.5 billion and the cost of continuing is $1.2 billion then the project should be completed. 3. Plan A affects variable cost and therefore price. Plan B affects a fixed cost and hence does not affect price. The patients will benefit from Plan A but not Plan B. 4.
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Price Theory HW4 answers - Skelton Eco 3301 Homework 4...

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