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380 Problem Set _11

# 380 Problem Set _11 - Problem Set#11-Markets Partial...

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Problem Set #11-Markets, Partial Equilibrium Last Problem Set Econ. 380- R. Pope 1. Each consumer has preferences U xy = , the price of y, 2 y p = and incomes, I=100 for each consumer. a. Calculate the market demand curve 162 1 ( ) *( , , ) D D i x y i Q P x p p I = = for an economy comprising 162 individuals as a function of price, P D = p x given the data above. b. If the short run cost curves are of the form C 2 2 10 5 w vk q q k = + = + for 5, 1, 10 w k v = = = what would be the competitive industry short-run supply curve for 1000 competitive firms? c. Calculate the competitive equilibrium market price and total quantity produced and demanded using the data in a. and b. for industry supply and market demand. d. If a price ceiling of \$7 is imposed, how will this affect the quantity supplied? What is the total welfare effect or dead-weight loss (using ordinary consumer and producer surplus-you will need to use an integral) of this ceiling policy compared to the free-market competitive solution? 2. A perfectly competitive industry has a large number of potential entrants. Each firm has an identical cost structure such that long-run average cost is minimized at an output of 20 units (

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380 Problem Set _11 - Problem Set#11-Markets Partial...

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