# Problem Set 3.pdf - The Paul H Nitze School of Advanced...

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Chapter 10 / Exercise 37
Business Analytics: Data Analysis & Decision Making
Albright/Winston
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The Paul H. Nitze School of Advanced International Studies The Johns Hopkins University MICROECONOMICS Fallterm 2018 PROBLEM SET III Due on Dec 3 rd (Professor Luppi) and Dec 4 th (Professor Alvisi and Carbonara) 0. Exercise 5 of Problem Set 2. Part e. Let the long run cost function of each firm have the same algebraic expression of the short run cost function, that is ࠵?࠵?(࠵?) = 5࠵? ( + 50࠵? + 500 . Market demand is unchanged. What is the long run equilibrium in terms of price and quantity? How many firms are active in the market? Compare the result with the one in part d. and discuss briefly. 1. Taxes and Social Welfare in Perfect Competition. A country is considering the introduction of a per-case tax t=2.5\$ in the market of canned fruit. The economic advisors to the country estimate the supply and demand curves for canned fruit as: Q D = 3600 – 400P Q S = -600 + 400P, Where P is the price per case and Q are cases per-day. a. What are the equilibrium price and quantity in the current environment with no tax? Illustrate your results in a graph, indicating the values of the intercepts. b. What price and quantity would prevail after the imposition of the tax? Illustrate your results in the graph of part a. What portion of the tax would be borne by buyers and sellers respectively? Discuss your results using the values of the price elasticities of demand and supply at the pre-tax equilibrium. c. What tax revenue will be generated? Calculate the deadweight loss from the tax as the difference between pre-tax and post-tax total surplus. Can you obtain the DWL from the graph using a different method? 2. General Equilibrium in a Pure Exchange Economy. Consider a pure exchange economy with two consumers, Harry and Meghan, who consume two commodities, pudding and salmon. Harry’s initial endowment is 16 puddings and 2 salmons. Meghan’s endowment is 8 salmons and 4 puddings. Their utility functions are ࠵? , = ࠵? . / ࠵? , and ࠵? 2 = ࠵? 2 ࠵? . / respectively. , 2
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The document you are viewing contains questions related to this textbook.
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Chapter 10 / Exercise 37
Business Analytics: Data Analysis & Decision Making
Albright/Winston
Expert Verified