ARE 100B - Homework 1

# ARE 100B - Homework 1 - ARE 100B M Whitney HOMEWORK 1 Due...

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ARE 100B M. Whitney HOMEWORK 1 Due in class April 16 th (Note: You make want to make a copy of your answers to study from) Spring 2009 1. (12 pts.) Suppose that demand for saffron is Q d= 5000 - 5P, where Q is pounds saffron. Given this demand. find the market outcomes under the various market structures below. (Saffron is a expensive seasoning produced from a species crocus flower) a. Perfect competition, short-run. Assume that at present, 10 fIrms grow saffron, and each has a total cost function rC i = 20.000 + 120*qj + 2 q/'2 Solve for market price, market quantity, quantity per fIrm, and profIt or loss per fIrm. (partial pounds saffron are okay) Is this market in long-run equilibrium? How can you tell? What will happen over the longer run? b. Perfect competition, long~run. For the same fIrm cost function above, fmd the long-run equilibrium quantity per fIrm, the market price, market quantity and equilibrium number fIrms. What is the profit or loss per firm? c. Multiplant monopoly. Return to part a. Suppose that, instead moving toward long-run competitive equilibrium as in b, the 10 existing firms were purchased by a monopolist and run as a multiplant monopoly. How much output would be produced at each plant, and how much by the firm as a whole? What would be the monopoly price? What is the monopolist's profit or loss per

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## This note was uploaded on 11/19/2009 for the course ARE ARE100B taught by Professor Chenguang during the Spring '09 term at UC Davis.

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ARE 100B - Homework 1 - ARE 100B M Whitney HOMEWORK 1 Due...

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