Chapters%208%20and%2010%20Practice%20A

# Chapters%208%20and%2010%20Practice%20A - discovers a new...

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Chapters 8 and 10 Practice A 1. True/False: “If Jack Daniel’s whiskey sells for \$10 per bottle and if 1,000 bottles were sold last year, then the total value of those bottles to consumers was \$10,000.” Explain your answer. 2. #26 on page 267: The American supply and demand curves for widgets are illustrated below. Foreign widget makers will sell any quantity of widgets to Americans at a price of \$2 each. Suppose that government distributes 500 ration coupons, which can be freely bought and sold. To buy a foreign-made widget, you must present a ration coupon. (An American widget requires no coupon.) What is the price of a ration coupon? (Your answer should be a number.) 3. A monopolistic firm produces widgets at a constant marginal cost of \$10 each. One day, it

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Unformatted text preview: discovers a new production process that would lower its marginal cost by \$1 per widget. Use a graph to show how much its producer surplus will increase if it adopts the new production process. 1 4. We know that for a competitively supplied good, the economic incidence of a tax is independent of the legal incidence. That is, a sales tax and an excise tax of equal magnitudes have exactly the same effects. Is the same thing true for a good supplied by a monopolist? Explain your answer. 5. Assume the demand for GM’s Hummer H2 is the following: P = 100,000 – 500Q. The total cost of production is the following: TC = 2,000,000 + 300Q 2 . Calculate the profit-maximizing price (P) and output level (Q), and the level of profit enjoyed by the firm. 2...
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Chapters%208%20and%2010%20Practice%20A - discovers a new...

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