{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Problem_Set_7_Solutions

Problem_Set_7_Solutions - ECON W3211.002 Intermediate...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON W3211.002 Intermediate Microeconomics Problem Set 7 Answer Key Due Monday, November 15, 2010 1. If the inverse demand function for radios is p = a - bQ , what is the consumer surplus if price is a/ 2 ? The first step is to find quantity demanded at that price, which is Q = a 2 b . Consumer surplus is the area below the demand curve and above the price line. In this case, the area is a triangle with height a 2 and length a 2 b , so that consumer surplus is a 2 8 b . 2. If the supply function is Q = Ap η , what is the producer surplus if price is p * ? We assume η 1 so that the supply curve slopes upward. Quantity demanded at p * is A ( p * ) η . The inverse supply function is p = ( Q A ) 1 η . Producer surplus is the area under- neath the price line and above the inverse supply function, which is gotten by evaluat- ing R A ( p * ) η 0 [ p * - ( Q A ) 1 η ] dQ . Evaluating this integral and simplifying terms gives us PS = 1 η +1 A ( p * ) η +1 . 3. Suppose that the demand curve for wheat is Q = 100 - 10 p and the supply curve is Q = 10 p .
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern