Hw Set 1 - INTERMEDIATE MICROECONOMIC THEORY ECONOMICS 301...

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INTERMEDIATE MICROECONOMIC THEORY ECONOMICS 301 FALL 2010 PROFESSOR MULLIGAN FIRST PROBLEM SET (DUE THURSDAY, SEPTEMBER 23 rd ) 1. Assume that the aggregate demand curve for pork has a negative slope, while the aggregate supply curve has a positive slope. a. Assume that the price of beef decreases. Show with a graph what happens to the aggregate demand curve for pork and the equilibrium market price and quantity for pork. b. Assume that there is a decrease in the price of inputs used in the pork industry. Show what effect this decrease in input prices has on the aggregate supply curve for pork and the equilibrium market price and quantity for pork. c. Explain what will happen to the market equilibrium price and quantity of pork if these two shocks occur at the same time. 2. Assume that there are 20 identical firms that sell 50 units each of the same good when the market price is $10 per unit. They have identical individual supply curves that are positively sloped straight lines that go through the origin. 10 of the firms are foreign firms and 10 are domestic firms. a. Draw a graph of the aggregate supply curve. Indicate on your graph the quantities supplied at the prices of $5, $10 and $20. b. Assume now that the government imposes a quota on each of the 10 foreign firms limiting them to 50 units each. Draw the new aggregate supply curve that shows the effect of the quota. Indicate on your graph the quantities supplied at
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Hw Set 1 - INTERMEDIATE MICROECONOMIC THEORY ECONOMICS 301...

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