Homework#1 Solution
1
a)
Substituting the values of R and T, we get
Demand : Q d = 70 2 P
Supply : Q s = 14 + 5 P
In equilibrium, 70 2P = 14 + 5P, which implies that P = 12.
Substituting this value back, Q = 46.
b)
c)
Elasticity of Demand = 2(12/46), or 0
Econ 301 Practice for Midterm Exam 1
1.
A consumer can spend her fixed income of $200 on two products, food (F) and luxuries
(L). The consumers tastes are represented by the following utility function:
U = FL
Food sells for $2 per unit and luxuries sell f
HW#4 Solution
1. a)
Starting with the tangency condition we have
MPL w
=
MPK r
L1/ 2 + K 1/ 2 L1/ 2 2
=
L1/ 2 + K 1/ 2 K 1/ 2 1
K
=4
L
K = 4L
Plugging this into the total cost function yields
= L1/ 2 + (4 L)1/ 2
Q
Q = 3L1/ 2
2
2
Q = 9L
Q
L=
9
Insertin
Economics 301: Microeconomics
Fall Quarter, 2012
Homework#6
Due on Thursday Dec 6
1. A pipeline transports gasoline from a refinery at point A to destinations at R and T.
The marginal cost of transporting gasoline to each destination is MC = 2. The pipeli
Econ 301 Practice for Midterm Exam 1
1.
Let Q = 12(KL)2 K4.
a. What is the average product of capital?
b. Does this production function exhibit increasing, constant, or decreasing
returns to scale?
2.
Let Q = L1/3K2/3, where Q is output, L is labor, and K
Fall 2013 Econ 301 Microeconomics HW 4
Due Thursday Nov 7 by 2 PM
1. Consider a production function of two inputs, labor and capital, given by Q = (L + K)2. The
marginal products associated with this production function are as follows:
Let w = 2 and r = 1
Fall 2013 Econ 301 Microeconomics HW 1
Due Thursday Oct 10 by 2 PM
1. Consider the following demand and supply relationships in the market for golf balls: Qd = 90
2P 2T and Qs = 9 + 5P 2.5R, where T is the price of titanium, a metal used to make golf
clu
Asymmetric
Information
and Moral Hazard
Julie Becher, PhD
Outline
Asymmetric information
Moral hazard
Financial crisis
Asymmetric information
Asymmetric informationsituation in which a buyer and seller
possess different information about a transaction
Solution to HW 1 Econ 301
1. a) Substituting the values of R and T, we get
Demand : Q d 70 2 P
Supply : Q s 14 5P
In equilibrium, 70 2P = 14 + 5P, which implies that P = 12. Substituting this value back, Q =
46.
Elasticity of Demand = 2(12/46), or 0.52. E
Market Power
Julie Becher, PhD
Outline
Sources of market power
Monopoly model
Rule of thumb for pricing
Monopsony (time permitting)
Antitrust policy
Market Power
Monopoly
Market or monopoly powerability of a seller to
affect market price and raise
Market Power
(continued)
Julie Becher, PhD
Outline
Natural monopoly
Regulation of monopoly
Pricing discrimination
Natural Monopoly
Natural Monopoly - a market where economies of scale are such
that one firm can produce market output at lower cost than
Production and Costs
Julie Becher, PhD
Outline
1) Production function
2) Production in the short run
3) Production in the long run
4) Returns to scale
Production
The consumers problem is to maximize his utility given his
budget constraint.
The firms
Econ 301 Microeconomics
Lecture 6. Theory of Demand-cond
Professor Mian Dai
Fall, 2013
A road map for todays lecture
Review: how do we derive demand curve (optimal
bundle)
How price affect consumer welfare
Compensating Variation (CV)
Equivalent Variat
Solution HW#3
1.
a) To determine the nature of returns to scale, increase all inputs by some factor
and determine if output goes up by a factor more than, less than, or the same as
.
= 50 M L + M + L
Q
= 50 ML + M + L
Q
= 50 ML + M + L
Q
Q = Q
By incre
Review for Final Econ 301, Spring 2012
1. Suppose that a monopolist faces a constant elasticity demand curve for its output, where
Q,P = -2. Further, suppose that the monopolist has a constant marginal cost of MC(Q) =
1. What is the monopolist's profit ma
Externalities, Common
Resources, and Public
Goods
Julie Becher, PhD
Outline
Externalities
Common property resources
Public goods
Externalities
Negative externalityan action by a producer or consumer that harms other parties but is not accounted for in
Costs
Julie Becher, PhD
Costs in the Short Run
Fixed cost (FC)cost that does not vary with the amount of output
Variable cost (VC)cost that varies with the amount of output
Examples include labor costs, energy costs, and the cost of raw
materials
Costs
Math Review for Microeconomics/Industry
Organization
Mian Dai
Drexel University
January 3, 2014
1
Introduction
Economics is a quantitative social science and to appreciate its usefulness in
problem solving requires us to make limited use of some results f
ECON 301: Microeconomics
Spring 2015
Problem Set 4
Due at the start of class on June 2. You may work with your teammates, but you must turn in
your own version. All solutions should be neatly and clearly written. Be sure to label any graphs
and clearly in
ECON 301: Microeconomics
Spring 2015
1
Problem Set 1
Due at the start of class on April 14. You may work with your teammates, but you must turn in
your own version. All solutions should be neatly and clearly written. Be sure to label any graphs
and clearl
Demand
Julie Becher, PhD
Outline
1. Utility maximization: example of a corner
solution
2. Price indexes and the CPI
3. Demand functions and consumption curves
4. Income and substitution effects of price change
Utility Maximization:
Example of a Corner
Consumers
Julie Becher, PhD
Outline
1) Consumer Preferences
2) Indifference Curves
3) Utility
4) Budget Constraint
Consumer Preferences
Bundle or Basket:
Example 1: 12 Days of Christmas is a well known song
about a bundle
1 partridge in a pear tree
Costs (continued)
Julie Becher, PhD
Outline
Long run cost continued
Short run profit maximization in perfect competition
Long Run Cost
Economies of scale
if output goes up by X%, cost goes up by _ X%
Diseconomies of scale
if output goes up by X%, co
Market Power
(continued: Part II)
Julie Becher, PhD
Outline
1) Peak load pricing, 2 part tariff, bundling
2) Monopolistic competition
3) Oligopoly
4) Cournot model
5) Bertrand model (time permitting)
Peak load pricing
Peak load pricing
The same mar