# Spreadsheet problem 1 1 a p 30 d for a profit 303250

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Spreadsheet problem 1 1. ( a ) P = \$30 ( d ) For ( a ), profit = \$30(3,250) – 0.005(3,250)2 + 3,250 = \$47,937.5 Froeb and McCann’s chapter 9: a. Individual problems: 9-2 Entry and Elasticity Use the formula (p-mc)/p=1/|elasticity| to determine marginal cost. If the old price is \$10 with an elasticity of -2, that means that marginal costs are \$5. (10 - mc)/10 = 1/2 10 - mc = 5 10 = 5 + mc 5 = mc Use the same formula with the marginal cost and the new elasticity to determine the price. The new price will be \$7.50. (p - 5)/p = 1/3 p - 5 = 1/3p p = 1/3p + 5 2/3p = 5 p = 5(3/2) p = 7.5 9-4 Economic Profits In the short run, a monopolist should have higher economic profits. In the long run, both should be expected to have zero economic profit. The monopolist will take longer to reach the long run.

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Froeb and McCann’s chapter 11: a. Individual problems: 11-3 The Carry Trade A decline in US rates would increase the so called carry trade where EU consumers borrow in dollars to finance consumption or investment in the EU. They borrow dollars from US banks, sell dollars to buy euros, and spend the euros in the EU. This increases demand for euros, and raises the price of a euro. The dollar depreciates against the euro. 11-4 Dollar Devaluation A dollar devaluation will increase the demand for US goods and services from Mexican consumers, raising the US price and quantity. This will benefit US producers, but hurt US consumers. A dollar devaluation will also reduce demand for Mexican goods and services, reducing the Mexican price and reducing quantity. This will hurt Mexican producers in Juarez, but benefit Mexican consumers.
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• Spring '13
• GeorgeYoung

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