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 elastic over this range of prices. b. When P = $4, R =
Chapter 4: Answers to Questions and Problems
1. a. The market rate of substitution is
Px 10 = = 0.25 . Py 40
b. See Figure 4-1. c. Increasing income to $800 (by $400) expands the budget set, as shown in Figure 4-1. Since the slope is unchanged, so is the
Chapter 10: Answers to Questions and Problems
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. c. (B, E). 2. a.
Player 2 Strategy Player 1 A B A B
$500,
Chapter 2: Answers to Questions and Problems
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. Since Y is an inferior good, a decrease in income will lea
Chapter 6: Answers to Questions and Problems
1. When an input has well-defined and measurable quality characteristics and requires specialized investments, the optimal procurement method is a contract. A contract reduces the likelihood of opportunistic be
Chapter 8: Answers to Questions and Problems
1. a. b. c. d. e. f. g. h. 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)2 = $832, so profits are $608. d.
Chapter 13: Answers to Questions and Problems
1. a. 16 units. b. Note that P = $200, AC = $180, and Q = 16, so profits are ($200 - $180)(16) = $320. c. Yes; if it can credibly commit to a higher output it will earn even greater profits. 2. a. MD = M + $10
Chapter 11: Answers to Questions and Problems
1.
E 1.5 a. Since E = EF = EM, P = MC = $75 = ( 3) $75 = $225 . 1+ E 1 1.5 2 ( 1.5) EF NEM b. P = $75 = (1.5) $75 = $112.50 . MC = $75 = 1 + EF 1 + NEM 1 + 2 ( 1.5)
EF c. P = 1 + EF 2.
NEM MC = 1 + NEM
20
Chapter 14: Answers to Questions and Problems
1. a. 2,000. b. 2,800. c. Yes. Both the pre-merger HHI and change in HHI exceed those specified in the guidelines. 2. a. i. About $125. ii. Approximately $281.25 (computed as .5[7.5][$200 - $125] = $281.25). b