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Microsoft PowerPoint - Review Exam 2

Microsoft PowerPoint - Review Exam 2 - 2.25 2.50 2.75 3.00...

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1 Practice Problems Elasticities Calculate Elasticies: Recognize Elastic vs. Inelastic Elasticity and income/Taxation Elasticities • E D = -0.50 • E Y = 0.75 • E X,Y = -0.45 Questions: 1. Elastic? 2. Normal? 3. Substitutes or Complements? 4. If price/income/cross price goes up 10%, what happens to Q D ? Tax = $0.20 quantity $0.20 $0.80 $0.60 $0.40 20 40 60 80 100 price 120 140 1.00 Questions What is the new price consumers pay? What is the price suppliers receive? What is the tax revenue? What is the DWL? Subsidy = $30 quantity (thousands of tons) 20 80 60 40 20 40 60 80 100 Supply Dem and 100 price ($/ton) 120 140
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2 Questions What is the new price consumers pay? What is the price suppliers receive? What is the subsidy cost? What is the DWL? 38000 41000 45000 48000 50000 52000 55000 58000 1 1.25 1.50 1.75 2.00 2.25 2.50 2.75
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Unformatted text preview: 2.25 2.50 2.75 3.00 Demand Supply MSC Questions • What is the market Q? What is the efficient Q? • What is the DWL, CS, PS if unregulated? • What is the remedy • What is the tax revenue/subsidy cost • CS, PS, DWL with remedy 5 4 3 2 1 10 11 12 13 14 5 4 3 2 1 290 300 310 320 330 340 Supply Demand Questions • What is the short-run q per firm • What is the profit per firm in the short-run • If a loss, should the firm shut-down? • In the long-run what will happen • What is long-run price, q per firm, profits? Monopoly 5 4 3 2 1 10 15 20 25 30 35 Demand MR 3 Questions • What is the Monopoly price and quantity • What is the Monopoly profit and DWL? • What is the efficient regulatory price? • At that price what is profit and DWL?...
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