What is the market clearing price and output
Course:- Microeconomics
Reference No.:- EM13785932

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A restaurant has three types of customers. A third of its customers, Type A, are willing to spend $5 on an appetizer but only $2 on a dessert. Another third, Type B, are willing to spend $3.50 on an appetizer and $3.50 on a dessert. The remaining third, type C, are willing to spend only $2 on an appetizer but $5 on a dessert. All three types are willing to spend $10 on the main course. It costs the restaurant a constant $2 to prepare an appetizer or a dessert, and $7 to prepare the main course. Which is optimal for the restaurant, to offer appetizers and desserts a la carte (with separate prices on the menu), or to offer them as a complete meal, tied with the main course? The manager of a national retailing outlet recently hired an economist to estimate the firm's production function. Based on the economist's report, the manager now knows that the firm's marginal product of labor is MP = 60 - 2L, where L is the number of workers hired. The manager can sell the product in the market place for $100 per unit, and the wage rate for labor is $200. How many workers should the manager hire? The San Francisco Power Company faces a peak period demand of Pp = 10 - Qp and an off-peak period demand of Pop = 4 - Qop. The corresponding marginal revenue curves are MRp = 10 - 2Qp and MRop = 4 - 2Qop. The marginal cost of building capacity is 2 cents and the marginal cost of operation is 1cent. Prices are in cents/kilowatt hours and quantities are in millions of kilowatt-hours. Find the peak period price and quantity and the off peak period price and quantity? How do the managers use the concepts of cross price elasticity and income elasticity of demand in decision making process? Give example of any two of them to reinforce your explanation. Suppose demand and supply curves are given by: Qd = 50 -P and Qs = 0.5P-10. What would be the magnitude of surplus or shortage if the price is $42. What is the market clearing price and output? 

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