homework 5

homework 5 - bigger version for the analysis), consider the...

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Economics 100B Jacobsen Homework 5 (10/28/08) (Chapter 8) 1. Assume there are five identical firms with short-run cost functions equal to C = 15 + 4 Q + Q 2 . a) How much does one of the firms supply as a function of P ? b) What is the market supply curve? c) Suppose market demand is Q market demand = 20 ! 1 2 P , what is the equilibrium price and quantity in the market? 2. (Perloff Chapter 8 problem 34) Each firm in a competitive market has a cost function of C = 16 + Q 2 . The market demand function is Q market demand = 24 ! P . Determine the long run equilibrium price, quantity per firm, market quantity, and number of firms. (Chapter 9) 3. Using the usual graph of demand and short-run supply (see below, you will want to draw a
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Unformatted text preview: bigger version for the analysis), consider the following government policy: The government buys all of the initial equilibrium output in this industry, Q , for a price P 1 where P 1 < P and output is positive. Suppose the government takes the output away and uses it outside the country, in a way that doesnt provide any utility to the initial consumers. 1. What happens to producer surplus? 2. What happens to consumer surplus? 3. Now suppose the government instead gives the output to consumers for free, starting with the people who like it most. Discuss what happens to overall welfare. What is the dead-weight loss of the policy? S D P 0 P 1 Q 0 P Q...
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