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18 views

Econ500Fall2024AE

y y y

Uploaded by

yutaon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Econ 500 Fall 2024

Extra assignment

Below are some sample questions that test fundamental learning outcomes you need to master.

Pick 5 of these questions and submit your answers for A4 credit. Completion is sufficient.

Studying the rest of the questions is highly encouraged.

1. Equilibrium quantity Q=8000, equilibrium price P=20. Demand elasticity is -1.5 Supply
elasticity is +1.2
a. Reconstruct linear demand and supply functions
b. Pick on of the interventions and analyze the impact:
i. A price floor at P=22
ii. A price ceiling at P=18
iii. A tax of 4 per unit
iv. A subsidy of 2 per unit

2. Briefly define and graphically illustrate the law of:


a. Diminishing Marginal Rate of Substitution
b. Diminishing Marginal Rate of Technical Substitution

3. A consumer’s Utility function is U(X,Y)=X0.25 Y0.75


a. Find the utility maximizing bundle if I=1200, Px=5, Py=9
b. Find the utility loss when X is taxed at 1 per unit
c. Draw a linear approximation to the demand for X and calculate the approximate dollar
equivalent of the utility loss
d. Show that the consumer would prefer the revenue equivalent income tax
e. Would the consumer prefer to live elsewhere where her income is I=2000 but prices are
Px=7.5, Py=10

4. A firm’s production function is Q = L2/3 K1/3

a. Find the minimized cost of producing 1000 units if w = 4 and r = 16

b. Find the short run and long run total cost of reducing output to 750

c. Should the firm relocate elsewhere if w = 6 and r = 12

d. Derive the total cost function

5. A monopoly is facing the demand Q = 440 – 2P and has a total cost TC = 3600 + 40Q +1/2Q2

a. Find the profit maximizing output, monopoly price, maximized profit, consumer surplus
and deadweight loss

b. Is it possible to regulate the monopoly with the competitive price cap?


6. A representative competitive firm has the total cost TC = 100Q-30Q2+3Q3.

a. Find the number of firms that will be active in the long run equilibrium if the demand is
Q = 3800- 16P

b. Analyze and illustrate the industry response to a negative demand shock Q = 2500- 12P

7. Compare and contrast Monopoly and Perfect Competition in terms of their welfare and
efficiency consequences. Illustrate the long run equilibria of both.

8. Illustrate the per unit cost figures of a profit maximizing competitive firm, and comment of what
the firm should do if the current output level is where:

a. AVC is falling

b. AVC is rising but ATC is falling

c. ATC is rising

9. Are the following statements true: Illustrate your answer

a. A price ceiling always benefits consumers

b. A price floor always benefits producers

c. The welfare burden of a tax is equally split between buyers and sellers

10. A consumer has the utility function U = X0.2 Y0.8 . Her current bundle has X = 32 and Y = 20.
If Px = 5, and PY = 2 , calculate marginal utility per dollar spent on both goods and show whether this
consumer can increase utility without increasing expenditure.

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