Problem Set 6 Economics 100, Winter 2010 Due Tuesday 2/23/10, 9 am 1. A perfectly competitive market has the following supply and demand curve: Qd = 100 – 2P Qs = 10 + P a. Show the effects of price floor (legal requirement that firms cannot sell at a price below the floor) set at $35 on the equilibrium price and quantity. b. What does the price floor do to the consumer, producer, and total surplus in this market? Calculate the value of each before and after the price floor is imposed. Explain your calculations using a supply and demand curve drawing. 2. A perfectly competitive industry is characterized by the following supply and demand curves: Qd = 10,000 – 200P Qs = 2000 + 800P a. Find the equilibrium price and quantity in the short run for this industry. b. A single firm in this industry has a (total) cost function given by: C = 100 + q 2 /100 + 5q Find the firm’s marginal cost, average variable cost, and average total cost functions.
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This note was uploaded on 01/16/2011 for the course ECN 100A taught by Professor Parman during the Winter '09 term at UC Davis.