Homework 3 is due Tuesday night at 11:45 p.m. on Aplia. Exam 2 is on Thursday, bring the big blue scantron (#30423) and #2 pencil. A review sheet and the lecture notes are available on the course webpage. Exam 2 covers Price Controls, starting in Lecture 5, and includes all Lectures through 9 (competitive price takers).
Questions on the Homework and Exam, with my response, can be seen by clicking on the comments for this blog post.
Subscribe to:
Post Comments (Atom)
17 comments:
Q: Concerning 3.8 on the homework, I get a number that is not one of the options. Any help?
A: How many buyers value the book at least $15? Count them, and then the cash received by the sellers will be the number of buyers times $15.
Q: For the number 4, all the questions involve a price ceiling of 8.5 and ask questions about gain. I don't fully understand the concept of gain...if there is no price ceiling then wouldn't the buyers have more gain?
A: The gain is the consumer surplus, the difference between what they valued the product at and what they had to actually pay. The effect of a price ceiling on consumer surplus is ambiguous, as some consumers will gain. However, fewer buyers achieve any gains as a shortage is created. Some fewer gain more, an ambiguous outcome for consumer surplus. Total social welfare (consumer + producer surplus) will be down, of course as there is deadweight loss.
Q: I don't really understand how to determine the tax in question 10.1 or the chart.
A: The amount of the tax will be the difference between what the buyer pays and the seller receives (govt receiving the difference).
Q: For 11 after you calculate the income and then subtract the costs, you are left with $5000. Do you subtract the $4000 OC or no since that is what you are simply missing out on by choosing an alternative?
A: The question asks you her "economic profit" which means you do indeed subtract the opportunity costs.
Q: On questions 16.1,16.2 you ask for the marginal cost. To get marginal cost according to your notes one must divide TC/Q. You only give the Variable cost information for these problems and no fixed cost. Does this mean there is not fixed cost? Should I only use the variable cost information in the formula?
A: In my notes, notice the triangles that are in the formula, which are the Greek symbol "delta." That was provided for those students who speak math, and it says marginal cost is the change in total cost from a change in quantity. What you should use in answering the questions is that the marginal cost is the cost of Aunt Betty producing one more unit. Since the fixed cost does not change over output, total cost changes by the amount of total variable cost. So the change in the total variable cost from producing one more unit is the marginal cost.
Q: How do you find the tax burden for a producer?
A: It is the area of the tax revenue rectangle that used to be producer surplus when in market equilibrium prior to the tax.
Q: I am confused by the wording of Question 3.3.
A: I suppose draw out the supply and demand graph based on 3.1 and 3.2 with the correct price and quantity. 3.3 asks would the proposed price ceiling move us away from the market equilibrium or is it too low to make a difference?
Q: Can you give me a hint to find the answer to Question 7?
A: All the potential answers deal with elasticity. Remember that burden and deadweight loss are larger as elasticity grows. Draw a graph or otherwise logic on what it would mean to be perfectly inelastic in demand. Remember that deadweight loss is the lost consumer & producer surplus from lower market output. Something that is a luxury good is something we are highly elastic to, and something with many close substitutes is highly elastic.
Q: On question 9.4 I was not sure whether to include the tax or not in the answer.
A: The answer should include the tax, as it is part of what the consumer pays.
Q: On question 10.4, I was not sure if you just wanted the area in between the supply and demand added or how you wanted that answer calculated.
A: A textbook is worth $4 more to buyer 8 than to seller 8. You can read this on the graph as the vertical distance between their dots. From the graph, you can also tell that a textbook would be worth $2 more to buyer 9 than to seller 9. In the absence of the tax, they could trade with each other and create an additional $6 in gain. But with the tax, these trades do not take place.
Q: I came into a few problems with 22.3,23.2,25.2,25.3. A lot of these
have to do with graphing long and short run. I get confused with the
graphs and I think this is why I may be having problems with these
questions.
A: Remember that the firm's supply curve is the marginal cost curve. The question(s) stipulates to graph it where output is positive. Since output cannot be negative, this means they are actually producing something as opposed to shutting down and producing nothing. In the short run, the firm should produce as long as price is greater than or equal to Average Variable Cost.
Q: How is a firm's total revenue determined?
A: Price times Output (P x Q)
Hello. This post is likeable, and your blog is very interesting, congratulations :-). I will add in my blogroll =). If possible gives a last there on my blog, it is about the Servidor, I hope you enjoy. The address is http://servidor-brasil.blogspot.com. A hug.
cialis super viagra cheapest viagra prices generic soft tab viagra viagra in the water uk alternative viagra can viagra be used by women viagra overnight sublingual viagra viagra soft tabs sublingual viagra viagra cheap price iframe suppliers of viagra buy viagra in england does watermelon have viagra effect
Hi everyone
I'm new to this forum.. Hope to have nice time around here...
big respect, Dennis from [url=http://www.myonlinepayday.com]Online Payday Loans[/url] website!
I am thoroughly convinced in this said post. I am currently searching for ways in which I could enhance my knowledge in this said topic you have posted here. It does help me a lot knowing that you have shared this information here freely. I love the way the people here interact and shared their opinions too. I would love to track your future posts pertaining to the said topic we are able to read.
Thank you for sharing to us.there are many person searching about that now they will find enough resources by your post.I would like to join your blog anyway so please continue sharing with us
Post a Comment