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Use the demand schedule for diamonds given in the previous question. The marginal cost of producing diamonds is constant at $100. There is no fixed cost.
a. If De Beers charges the monopoly price, how large is the individual consumer surplus that each buyer experiences? Calculate total consumer surplus by summing the individual consumer surpluses. How large is producer surplus?
Suppose that upstart Russian and Asian producers enter the market and the market becomes perfectly competitive.
b. What is the perfectly competitive price? What quantity will be sold in this perfectly competitive market?
c. At the competitive price and quantity, how large is the consumer surplus that each buyer experiences? How large is total consumer surplus? How large is producer surplus?
d. Compare your answer to part c to your answer to part a. How large is the deadweight loss associated with monopoly in this case?
Economists who align more with the "Classical" school would have a "leave it alone" (Laissez Faire) attitude and would oppose active policymaking. "Rational Expectations Theory" (a "new classical approach") suggests that people figure out what wil..
Suppose the price of celeriac decreases from $80 to $60, and the quantity demanded increases from 100 to 150 bushels. What is the price elasticity of demand using the standard percentage formulas? What is the arc price elasticity of demand?
Craft Unions Both industrial and craft unions attempt to raise their members' wages, but each goes about it differently. Explain the difference in approaches and describe the impact these differences have on excess quantity of labor supplied.
uppose that some firms in a competitive industry are earning zero economic profits, while others are experiencing losses. In the long run, we would expect the number of firms in the industry to.
Assume that instead of maximizing profit, the firm wants to maximize total revenue. Using algebra determine the optimal output, price, profit and revenue for the firm.
The market for a standard-sized cardboard container comprises two firms: BooBox and Flimflax. As manager of BooBox you enjoy patented technology which permits your company to produce boxes faster and at lower cost than Flimflax.
Draw a graph in the income-leisure time space showing a wage increase that leads an individual from one interior solution to another. Identify clearly on your graph the income and substitution effects on hours worked of the wage increase, as well ..
Calculate the point cross price elasticity of demand with respect to the price of competing television sets (P C ) at the values represented in question six and calculate the point income elasticity of demand for HD televisions at the values represen..
If the marginal propensity to consume equals 0.75, a $6,000,000 increase in government purchases will result in what increase to total output, assuming no crowding-out effect exists? A. $4,500,000 B. $6,000,000 C. $8,000,000 D. $24,000,000 E. $1,50..
Why might a profitable motel shut down in the long run if the land on which it is located becomes extremely valuable due to surrounding economic development What kinds of costs are involved in making a decision to shut down
If "excess profits" are taxed away, where will oil companies get the money to fund new exploration and development of oil properties? Does it matter if these price increases are demand or supply induced?
Consider a firm which employs capital and labor as inputs and sells 5,000 units of output per year at the going market price of $10. As well suppose that total labor costs to the firm are $45,000 annually.
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