Chapter 8: Answers to Questions and Problems
1.
a.
b.
c.
d.
e.
f.
g.
h.
7 units.
$28.
$224, since $32 7 = $224.
$98, since $14 7 = $98.
$126 (the difference between total cost and variable cost).
It i
Chapter 9: Answers to Questions and Problems
1.
a. D2 (the steeper curve)
b. D1 (the flatter curve)
c.
i. $20.
ii. 0 units.
iii. $20 to $50. At a price of $60, MR = $20 for D2 and MR = $50 for D1.
The
Chapter 5: Answers to Questions and Problems
1.
a. When K = 81 and L = 16, Q = (81)0.75(16)0.25 = 54. Thus, APL = Q/L = 54/16 =
3.375. When K = 81 and L = 256, Q = (81)0.75(256)0.25 = (27)(4) = 108. T
Chapter 11: Answers to Questions and Problems
1.
a. Since E = EF = EM,
b.
c.
P=
2
( 1+EE ) MC =( 12
) $ 150=$ 300
.
EF
N EM
2(2)
MC =
$ 150=
$ 150=$ 200 .
1+ E F
1+ N E M
1+2(2)
EF
N EM
20(2)
P=
MC =
Chapter 3: Answers to Questions and Problems
1.
a. When P = $12, R = ($12)(1) = $12. When P = $10, R = ($10)(2) = $20. Thus, the
price decrease results in an $8 increase in total revenue, so demand is
Chapter 7: Answers to Questions and Problems
1. The four-firm concentration ratio is:
$ 260,000+ $ 220,000+ $ 150,000+ $ 130,000
C 4=
=0.38 .
$ 2,000,000
2.
a. The HHI is
[(
)]
$ 300,000 2
$ 700,000 2
Chapter 2: Answers to Questions and Problems
1.
a. Since X is a normal good, a decrease in income will lead to a decrease in the
demand for X (the demand curve for X will shift to the left).
b. Since
Chapter 10: Answers to Questions and Problems
1.
a. Neither player has a dominant strategy.
b. Player 1s secure strategy is B. Player 2s secure strategy is E.
c. (B, E).
2.
a.
Strategy
A
B
Player 2
A
Baye Chapter 8: Questions 2, 5, 6, 12, 13
Question 2:
a. Set P = MC to get $80 = 8 + 4Q. Solve for Q to get Q = 18 units.
b. $80.
c. Revenues are R = ($80)(18) = $1440, Costs are C = 40 + 8(18) + 2(18
Baye Chapter 2: Questions 1, 4, 5, 8, 14
Question 1:
a. Since X is a normal good, an increase in income will lead to an increase in the
demand for X (the demand curve for X will shift to the right).
b
Baye Chapter 7: Questions 1, 3, 5, 11, 13
Question 1:
The four-firm concentration ratio is,
Question 3:
The elasticity of demand for a representative firm in the industry is 1.5,
since
Question 5:
Man
Baye Chapter 5 Questions 1, 2, 3, 4, 7, 14
Question 1:
a. When K = 16 and L = 16,
. Thus, APL = Q/L = 16/16 =
1. When K = 16 and L = 81,
24/81 = 8/27.
b.
. Thus, APL =
The marginal product of labor is
Baye Chapter 9: Questions 1, 2, 3, 4, 17
Question 1:
a. D2.
b. D1.
c.
i.
ii.
iii.
$20.
0 units
$20 to $50.
Question 2:
a c1 1
100 12
Q2
2b
2
2 2
a c2 1
100 20
Q2
Q1
2b
2
2 2
b. Q1 = 16; Q2 = 12.
Baye Chapter 3: Questions 2, 5, 6, 11, 14
Question 2:
a. At the given prices, quantity demanded is 700 units:
. Substituting the relevant information
into the elasticity formula gives:
. Since this is
Baye Chapter 10: Questions 1, 2, 5, 7, 15
Question 1:
a. Player 1s dominant strategy is B. Player 2 does not have a dominant strategy.
b. Player 1s secure strategy is B. Player 2s secure strategy is E
Baye Chapter 1: Questions 2, 4, 6, 8
Question 2:
The maximum you would be willing to pay for this asset is the present value, which is
150, 000
150, 000
150, 000
150, 000
150, 000
PV
2
3
4
1 0.09 1
Chapter 1: Answers to Questions and Problems
1.
Producer-producer rivalry best illustrates this situation. Here, Southwest is a
producer attempting to steal customers away from other producers in the