110_11s_HW2_Solution - (graph Q2 The trucking industry is...

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HW2 (Due date: Mar 16, 2011 (wed), 6pm) Q1 If this year there is an unexpected good harvest of orange, how will it affect the supply and demand curve? How would you predict the change in equilibrium price and sellers’ revenue? Illustrate your answer by graphs. ANS: Supply of orange increases. Supply curve shift to the right. Equilibrium price falls and equilibrium quantity rises. Sellers’ revenue change is ambiguous. or, inelastic supply and elastic demand leads to increase in the total revenue.
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Unformatted text preview: (graph) Q2 The trucking industry is perfectly competitive. Suppose, in US, there are 1,000 trucking companies. Each has a marginal cost of: MC=1+Q Where MC is in US dollar (per ton-mile), Q is in thousand ton-mile per day. a). What is the US trucking industry’s market supply curve? b). Suppose the market demand curve is given by P=100-0.01Q Where P is in US dollar (per ton-mile), Q is in thousand ton-mile per day. What are the market equilibrium price and quantity? ANS: a. Q=1000(P-1) b. P=10, Q=9000 1...
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