p2k sp03

# p2k sp03 - 3a 1 Get BL 1 B and IC 1 2 New Bundle “B” is...

This preview shows pages 1–2. Sign up to view the full content.

4 lratc \$ x \$ X 500 1000 100 800 SRS 100 aog Education 20,000 100,000 500 1000 IC 1 BL 1 IC 0 F A B G 400 BL 0 Econ 101 – Wissink – Spring 2003 – Exam 2 – KEY Part1 1. D 2. C 3. C 4.E 5. A 6. D 7. D 8. C 9. B 10. C 11. C 12. D 13. D 14. A Part II. 1a) D – srtc E – sravc F – sratc G – srmc b) x = 7. Profit = TR – TC = price 7 – Total cost at 7 units = 25 7 – 109 = 66. c) x = 3. Profit = Total revenue – total cost = price 3 – total cost at 3 units = 6.50 3 – 51 = -31.50. Since the profit is lower than Betsy’s Bowties fixed cost of \$30, the firm should shut down. Hence output is 0 and the profit is \$-30. d) For b) there is no change in the answer. However, for c), again the firm should shut down and the output is 0 and the profit is \$-5. 2. 1. 4 ties (need to be a min of lratc) 2. Price is \$100 per tie 3. Since X D = 1000 – 2P* => X * = 1000 – 200 = 800. 4. N* = 800/4 = 200 5. Since we are at a LR equilibrium, profit = \$0.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 3a. 1. Get BL 1 , B and IC 1 . 2. New Bundle “B” is on BL 1 , between F and G somewhere. Could do more or less education. 3. Yes. The Quinns are better off. D \$ SRS 0 D 0 P* Market A \$ srmc sratc lratc A* a* Firm a lratc Market \$ SRS (N* ) SRS 1 (N* 1 ) D 1 D A A C B A* 0 A’ A* 1 P* = P* 1 P’ P B srmc sratc Π >0 a=c a* 0 = a* 1 a’ b LRS a \$ firm Part III. a) b) See Graph above. Get SR: p’ => A’ = (a’)(N* ) and Π >0. So entry occurs. Get LR: p* = p* 1 , a* = a* 1 , A* 1 = (N* 1 )( a* 1 ) with N* 1 > N* , A* 1 > A* so Π = 0 again. c) With a rent ceiling, the price cannot increase to p’ to get rid of the shortage equal to A* 1- A* . Get permanent or persistent shortage of A* 1- A* . Could get black market prices of P B . Local residents are not helped. Apartments are more scarce as P B > P* o or there are waiting lists, lines etc....
View Full Document

### Page1 / 2

p2k sp03 - 3a 1 Get BL 1 B and IC 1 2 New Bundle “B” is...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online