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Discuss why Ei(p∗) = 0 is compatible with a competitive equilibrium.
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- Exercise 4.6 An econometrician hired to analyse a local golf course has determined that there are two types of golfers, the regular and the occasional. The annual demand for games from regular players is given by QH = 24 – 0.3P, where P is the price of a round of golf. On the other hand, the annual demand for occasional items is given by QO = 10 – 0.1P. The marginal cost and the average total cost per item are equal to €20. a) If you could distinguish between regular and casual players, what price would be set for each type? How many games would each type of player play? How much profit could the golf course generate? Represent graphically. b) As an alternative to the discrimination of third degree prices, those in charge consider a double tranche rate according to which the members can play as many games as they wish at a price of € 20 per game. How much profit will the golf course generate if it charges all players the same annual fee for becoming a member of the club? What if you…Suppose the graph depicts the marginal cost (MC) curves of two profit maximizing Texas cotton farmers, Jesse and Neal. Assume Jesse and Neal sell their cotton in the same competitive market. If the market price is $4 per bale, how many bales of cotton should each farmer produce? Jesse's optimal output: 800 Neal's optimal output: 400 bales MC Neal = MC Jesse MC Neal MC Jesse Price and cost $10- 9 8 7 160 5 4 3 2 0 MC, Neal MC, Jesse 100 200 300 400 500 600 700 800 900 1000 Bales of cottonWhat is then the use or relevance of the purely competitive model?
- Describe “near-efficiency” theory that was proposed by Grossman and Stiglitz.Hi! Can you help me with the question below? Northside Social (NS) sells cups of coffee and amazing breakfast sandwiches. The current price of a cup of coffee is $3.00 and the current price of an amazing breakfast sandwich is $8.00. At those prices, NS sells 1000 cups of coffee and 200 breakfast sandwiches daily. NS faces a constant marginal cost for each cup of coffee of 50 cents and the constant marginal cost of breakfast sandwiches is $2. NS increases the price of coffee 5%, to $3.15. After the price increase, NS sells 900 cups of coffee, a decrease of 10% in cups of coffee. Demand for coffee at NS at this price interval is best described as:A) ElasticB) InelasticC) Unitary ElasticD) Perfectly ElasticDespondent over the Red Sox's terrible season, Prof. Gruber decides to quit his day job and start a bicycle manufacturing firm in Kendall Square. As he starts looking into the bicycle manufacturing industry, he realizes it has some interesting features. First, he realizes that it operates as a competitive industry. Second, he finds that there are two technologies used by firms in the industry. Technology 1 uses solar power, and has a cost function C1(q)=q+4Q2+32 for q>0. Technology 2 uses electricity from the grid and is more efficient, with a cost function C2(q)=q+2Q2+32 for q>0. Assume that we are in the long run, so firms using both technologies can shut and leave the market at 0 cost, so that C(0)=0 for both technologies. Now, suppose that the government of Massachusetts offers solar subsidies to 10 bicycle manufacturers. These subsidies are for $80 and the manufacturers receive these subsidies as long as they construct a bicycle manufacturing plant using the newly-invented…
- A grape grower with a vineyard in the Edna Valley and in the Carneros appellation in Sonoma/Napa has a contract to produce 18 tons of pinot noir grapes for Gallo. The current allocation of the 18 tons results in a marginal cost of production in the Edna Valley vineyard of $800 (MCev = $800) and a marginal cost of production in the Carneros vineyard of $1200 (MCc = $1200). Explain whether the grower should move one ton of production from the Edna Valley to Carneros or vice versa. Make sure to provide a clear explanation of the outcome consistent with the idea of the equimarginal principle. Make sure to use the correct terms and units.Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D�) and supply curves (S=MC�=MC) in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from perfect competition. Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue…Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. (? Competitive Market 5.0 4.5 PC Outcome 4.0 3.5 2 3.0 2.5 2.0 S=MC 1.5 1.0 0.5 D 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hot dogs) Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the…
- Is Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. (?) PRICE (Dollars per hot dog) 5.0 4.5 4.0 8 3.5 3.0 2 25 e 20 1.5 0.5 + 0 0 10 20 Competitive Market S-MC 30 40 50 60 70 QUANTITY (Hot dogs) 80 90 D 100 + PC Outcome Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost…Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue (MR), and…Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. (? Competitive Market 5.0 4.5 PC Outcome 4.0 3.5 3.0 2.5 2.0 S=MC 1.5 1.0 0.5 D 30 60 90 120 150 180 210 240 270 300 QUANTITY (Hot dogs) PRICE (Dollars per hot dog)
