Discussion section problem set 3 econ 200 Fall 2010

Discussion section problem set 3 econ 200 Fall 2010 - Firm...

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Problem Set 3 Discussion Sections Economics 200 We will review these problems in discussion sections beginning Wednesday, September 22. 1. Consider the following market for cell phones: (a) What are the equilibrium price and equilibrium quantity of cell phones? (b) Shade in and label the consumer surplus and the producer surplus. (c) Shade in and label the cost of producing the cell phones sold. (d) Calculate the total surplus. (Hint: recall that the area of a triangle is equal to ½ x base x height.) (e) What is the efficient quantity of cell phones? 2. There are four consumers willing to pay the following amounts for an electric car: Consumer 1: $70,000 Consumer 2: $20,000 Consumer 3: $80,000 Consumer 4: $50,000 There are four firms that can produce electric cars. Each can produce one car at the following costs:
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Unformatted text preview: Firm A: $30,000 Firm B: $60,000 Firm C: $40,000 Firm D: $20,000 Each firm can produce at most one car. (a) What is the efficient number of electric cars? (b) Which firms should produce those cars? (c) Which consumers should purchase those cars? (d) How large is the maximum total surplus? (e) Show that if the price is $45,000 supply will equal demand. (f) Which firms will produce an electric car if the price is $45,000? (g) Which consumer will buy an electric car when the price is $45,000? (h) Calculate consumer, producer surplus, and the sum of consumer and producer surplus when the price is $45,000. (i) What is the point of this question? 3. Answer Question 6 on page 156 in the 5 th edition of Mankiw. 4. Answer Question 7 on page 156 in the 5 th edition of Mankiw....
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