ECN437 Exercise 3 Due Monday 2/13 Used automobile batteries can be a serious environmental problem. If they are dumped into landfills, the lead in the batteries can leach out and contaminate nearby aquifers. To explore this issue, consider the following scenario. A particular town has 100,000 people, each of whose demand for car batteries per year is given by P= 200–300Qi. In addition, suppose that batteries are produced at a constant marginal cost of $50, and the interest rate is 5%. Finally, please note that because the demand is batteries per year, Qi does not have to be an integer – if it were 1.5, for example, that would be 3 batteries every two years. 1. Please derive the market demand curve for batteries in a given year. Using it, determine the market equilibrium price and quantity of batteries. 2.
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This note was uploaded on 04/02/2012 for the course ECN 437 taught by Professor Peterwilcoxen during the Spring '12 term at Syracuse.