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John runs the only carwash in town; he is a monopolist. John estimates his daily demand for carwashes is given by the expression Q = 100?4P, where Q is the number of carwashes drivers will purchase at price P. It costs John $5 in electricity, soap, etc to run the carwash once. Additionally, John has fixed costs of $300/day.
a. What price should John set for a carwash? What will be his daily profit at this price?
b. If John were to lower his price by $1, he would sell more carwashes, and still be able to charge a price above his marginal cost. Explain intuitively why it would not be profit-maximizing to do so.c. What is John's elasticity of demand at his profit-maximizing price? Is it elastic or inelastic? If it is elastic, why does he not lower his price, as this would surely bring in many more customers? If inelastic, why does he not raise his price?
Keynes rejected the classical notion of Say's law. He argued that under-spending was very likely. Keynes focused on aggregate demand (total spending) as being the key determinant to the level of macroeconomic activity not aggregate supply which wa..
Three students have each saved $1000. Each has an investment opportunity in which he or she can invest up to $2000. The rates of return on the students' investment projects are: Harry: 5% Ron: 8% Hermione: 20%.) If borrowing and lending is prohibit..
Test the null hypothesis that the population variance is equal to 93 against the alternative that the population variance is greater than 93. Use alpha = 0.05. A random sample of 100 with a mean of 60 and a standard deviation.
The market interest rate is 10 percent and is expected to stay at that level. Explain your choice in each of the following situation: a. Would you prefer $500 gift today or $540 gift next year b. Would you prefer a $100 gift now or $500 loan without..
a. Solve for equilibrium output. Illustrate the equilibrium in the ISLM diagram. What is the value of the multiplier - Now let investment depend on both sales and the interest rate: I=b0+b1Y-b2i b. Solve for the equilibrium output (assume c1+b1
A firm produces paper clips with the following production function: F(K,L) = 3K^(2/3) L^(1/3) where K is the capital used in production and L is labor used in production. The rental rate for capital is r = 24 and the wage rate is w = 6.
Suppose there are 100 indentical firms in the perfectly competitive notecard industry. Each firm has a short run total cost curve of the form STC= 1/300 q3 +?0.2q?^2+4q+10 and marginal cost is given by SMC = .01q^2 + .4q + 4
Suppose the above government is producing $600 of real GDP, whereas the potential real GDP (or full-employment real GDP) is $700. How large is its budget deficit Its cyclically adjusted budget deficit
A consumer has a monthly budget of $100 for buying breakfast which he spends entirely on donuts (x) and breakfast burritos (y) from his favorite fast food restaurants. Donuts cost 50 cents each and Burritos cost $1 each.
How do the government bureaus different from private companies discuss why is there good reason to believe that bureaucrats will seek to supply more than efficient level of their output in any year?
Suppose you borrowed 10,000 dollars at an interest rate of 8 percent compounded monthly over 36 months. At the end of the first year( 12 payments), you want to negotiate with the bank to pay off the remainder of the loan in 8 equal quarterly payme..
The plant has a capacity output of 200,000 calculators per year, and the plant's manager regards 75 percent of capacity as the normal or standard output. The projected total variable costs for the normal or standard level.
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