Quiz 3 Solution - t P P P Q S D S D + = + -= since ) 6 ( 2...

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Quiz 3 Solution Fall 2000 Fred Aswani 1. 100 125 . 0 2 + = y STC 10 35 350 350 5 . 2 140 5 . 2 160 400 140 20 400 : m Equilibriu 140 25 . 0 35 25 . 0 ) 0 ( 25 . 0 : is firm for Supply 0 0 minimum, at 125 . 0 125 . 0 25 . 0 2 = ÷ = = × = = = = - = = = = = = = = = = y Y P P P P P Y P y P y SMC P y AVC y AVC y VC y SMC Correct Answer: e 2. LAC P min = 28 28 ) 12 ( 5 . 0 ) 12 ( 12 100 , 12 at price) m equilibriu LR at output s Firm' ( 12 0 12 5 . 0 12 100 2 2 = = + - = = = = + - = + - = P LAC y y y dy dLAC y y LAC Correct Answer: e
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3. 2400 28 1 . 0 268 = = - Y Y Correct Answer: d 4. 200 12 2400 firms of Number = = = y Y Correct Answer: c 5.a. 4 2 4 2 2 + = + = y SAC y y STC 4 4 2 4 2 2 + = + = + = y SMC y AVC y y VC - = < = - = + = = 4 4 4 0 4 4 , 4 For P if P y P if y S P y y P SMC P P f P P Y LAC LRS D 28 28 2400 12 P = 268 - 0.1 Y C y AVC 4 min. AVC = 4 P < 4, y = 0
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5.b. Market supply 1000 4 1000 4000 ) 4 ( 1000 4 1000 1 Y P or P Y P P Y i + = + - = - = - = = 5.c. Supply = Demand 6 1000 2000 4 2000 2 10000 4000 1000 2 10 1000 4 = + = = - = + - = + P P Y Y Y Y Y 5.d. 2 1000 2000 = = y 2 ) 5 6 ( 2 ) ( 5 ) 2 ( = - = - = = SAC P y SAC i π 5.e. 2000 2000 ) 2 6 ( 2 1 = × - × = PS 6000 4000 2000 4000 2000 ) 6 10 ( 2 1 = + = = × - × = Surplus Total CS 10 6 4 2000 P = 4 + ( Y / 1000) P = 10 - (2 Y / 1000) CS PS
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6.a. Equilibrium: Q D = Q S 20 ) 10 ( 2 40 10 60 6 20 4 2 40 = - = = = - = - Q P P P P 6.b. After tax demand:
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Unformatted text preview: t P P P Q S D S D + = + -= since ) 6 ( 2 40 At equilibrium: 12 ) 14 ( 2 40 14 6 8 8 48 6 20 4 12 2 40 = -= = + = + = = = -=--Q t P P P P P P S D S S S S 6.c. Top triangle area (loss in consumer surplus): 16 ) 12 20 ( ) 10 14 ( 2 1 =-- Lower triangle area (loss in producer surplus): 8 ) 12 20 ( ) 8 10 ( 2 1 =-- 20 18 14 10 8 5 12 20 6 Q P D D t S DWL 7. Q Q Q Q LTC 36 10 ) ( 2 3 +-= 11 36 50 25 ) 5 ( 5 5 10 2 36 10 ) ( min 2 = +-= = = =-= +-= = LAC Q at Q Q dQ dLAC Q Q Q LAC LAC P LR Therefore, long-run equilibrium price is 11....
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This note was uploaded on 06/18/2011 for the course ECON 2X03 taught by Professor Jamesbruce during the Spring '10 term at McMaster University.

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Quiz 3 Solution - t P P P Q S D S D + = + -= since ) 6 ( 2...

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