Question.2679 - This is a team assignment, so you must work with your assigned team to create one MS Word or PDF file in response to the questions in the attached document. One member of each team will submit your MS Word document or PDF for the whole team. No other formats will be accepted. As with all other assignments, please utilize well-executed, clearly constructed graphs where requested. Please remember to: ? Label all axes (P, Q) ? Label all lines/curves (Demand, Supply) ? Label all relevant equilibrium points ? Label intercepts for your linear demand and supply. (Intercepts are the points where the lines intersect the axes. For example, if a demand curve intersects the price axis at P=100, indicating that at P=100, 0 units are purchased, you should label that point on the axis with the price of 100) ? Please limit your depictions of supply and demand only to the non-negative values of P and Q (e.g., utilize only Quadrant 1 of the coordinate plane). This means that your supply curve will have one applicable intercept on the P-axis, while the demand curve will have two applicable intercepts on the P- and Q-axes. ? Clearly label areas that correspond to consumer surplus (CS) and producer surplus (PS). This assignment consists of 4 (four) questions. Please make sure that you complete all of them. We suggest that you utilize this Microsoft Word template for completing this assignment.This content is protected and may not be shared, uploaded, or distributed.Page 2 of 5Question 1 (10 points) Imagine that you have been given a job as an economic advisor to evaluate a certain competitive US manufacturing industry. Your (accurate) statistical analysis indicates the market is characterized by demand of Q d = 200 – 5P and supply of Q s = 3P – 24. ? Solve for equilibrium price P 1 and quantity Q 1 . ? Depict the supply curve S 1 and demand curve D 1 on the usual P, Q diagram. Label all relevant intercepts (including two intercepts for the demand curve and one intercept for the supply curve). Clearly indicate and label the market equilibrium. ? Graphically indicate the areas of Consumer Surplus (CS 1 ) and Producer Surplus (PS 1 ). ? Compute the values of Consumer Surplus (CS 1 ) and Producer Surplus (PS 1 ), clearly indicating the units that CS and PS are measured in.This content is protected and may not be shared, uploaded, or distributed.Page 3 of 5Question 2 (15 points) Continuing your analysis of the competitive US manufacturing industry from Question 1, with demand of Q d = 200 – 5P and supply of Q s = 3P – 24, suppose an improvement in technology causes the supply curve to increase, shifting the curve down by $8 for every given quantity Q. ? Determine the new supply equation. (Hint: What approach have you used to model taxes and subsidies in previous assignments?) ? Solve for equilibrium price P 2 and quantity Q 2 . ? Depict the original supply S 1 , the new supply S 2 , and the original demand D 1 on the usual P, Q diagram. Label all intercepts (including two intercepts for the demand curve and one intercept for the supply curve). Clearly indicate and label the new market equilibrium. ? Graphically indicate the areas of Consumer Surplus (CS 2 ) and Producer Surplus (PS 2 ) that resulted from the new market equilibrium. ? Compute the values of Consumer Surplus (CS 2 ) and Producer Surplus (PS 2 ) associated with the new market equilibrium, clearly indicating the units that CS and PS are measured in. ? What was the impact of the improvement in technology on consumers and producers, based on the comparison of CS and PS in Questions 1 and 2? In other words, were each of these two groups of market participants hurt or made better off by change? Why? (Narrative response; suggested length of three to four sentences or one paragraph.) ?This content is protected and may not be shared, uploaded, or distributed.Page 4 of 5Question 3 (10 points) Suppose a certain city has a monopoly cable-television company. This company has total costs TC = 0.125Q 2 + Q + 50. (Hint: using calculus, this means MC = 0.25Q + 1 since MC is the derivative of TC with respect to output.) The demand in the community is approximated by the equation Q d = 100 – 4P. ? Graphically depict the demand curve as well as the marginal cost (MC) curve. ? If the cable company is free to choose its own price P m and quantity Q m , graphically depict the monopoly equilibrium price and quantity. Add any other curve(s) to your diagram that may be required to obtain this outcome. ? Compute and state the exact monopolist equilibrium price P m and quantity Q m that you depicted graphically. ? What will be the profit made by the monopolist in this case? Please explain how you calculated this profit. ?This content is protected and may not be shared, uploaded, or distributed.Page 5 of 5Question 4 (15 points) Continue with your analysis of the monopoly cable-television company from Question 3, with demand of Q d = 100 – 4P and MC = 0.25Q + 1. ? Reproduce the graph which shows your demand and marginal cost (MC) curves, as well as any other necessary curves. ? Graphically indicate the socially optimal output level, Q soc , and compute the quantity and price associated with this output. ? Depict areas of consumer surplus (CS SOC ), producer surplus (PS SOC ), and any possible deadweight loss (DWL SOC ) associated with socially optimal outcome. (You do not need to determine the numerical size of CS, PS, and DWL, just show them graphically.) ? Depict areas of consumer surplus (CS m ), producer surplus (PS m ), and any possible deadweight loss (DW m L) associated with monopoly. (You do not need to determine the numerical size of CS, PS, and DWL, just show them graphically.) ? Explain how you’ve determined the socially optimal output level. How does the socially optimal output compare to the monopolist output in terms of individual CS, PS, and DWL (e.g., compare CS m and CS SOC , and so on)? How does the total surplus (sum of consumer and producer surpluses) compare between the two situations? (Narrative response; suggested length of four to eight sentences or one to two paragraphs. It might be useful to create a table to contrast the two settings.)
Answer Below:
Sure xxxx is xxx full xxxxxxxx The xxxxxx maximizing xxxxx for x monopoly xx the xxxxxxxx at xxxxx marginal xxxxxxx equals xxxxxxxx cost xx this xxxx the xxxxxxxx revenue xxxxx is xx - x The xxxxxxxx cost xxxxx is xx Q xxxxxxx these xxx equations xxxxx to xxxx other xx get x P x Solving xxx Q xx get x - x Substituting xxxx into xxx demand xxxxxxxx Qd x P xx get x P x P xxxxxxx for x we xxx P xxxxxxxxxxxx this xxxx into xxx demand xxxxxxxx we xxx Qd x Qd xxxxxxxxx the xxxxxxxx equilibrium xxxxx is x and xxx monopoly xxxxxxxxxxx quantity xx Q xxx profit xx the xxxxxxxxxx is xxxxx to xxx difference xxxxxxx its xxxxx revenue xxx its xxxxx cost xx this xxxx the xxxxx revenue xx TR xx and xxx total xxxx is xx Q x TC xxxxxxxxx the xxxxxx of xxx monopolist xx TR x TC x For xxxxxxxxxxx the xxxxxxxx optimal xxxxx we xxxx to xxxxxxxx the xxxxxxxx at xxxxx marginal xxxx MC xx equal xx marginal xxxxxxx MR xx the xxxxxxxx revenue xxxxx is xxxxxxxxx as xx - x and xxx marginal xxxx is xxxxx by xx Q xxx equation xxxxxxx - x Q xxxxxxx for x we xxx Q x P xxx socially xxxxxxx output xxxxx is xxxxxxxxxx as xxx quantity xx which xxx demand xxxxx intersects xxx MR xxxxx In xxxx case xxx demand xxxxx is x - x Making xxxx equation xxxxx to xxx MR xxxxx we xxx - x - x Solving xxx P xx get x Substituting xxxx into xxx demand xxxxxxxx we xxx Q x Q xxxxx the xxxxxxxx optimal xxxxxx level xx Q xxx the xxxxx associated xxxx the xxxxxx is x Consumer xxxxxxx is xxx much xxxxx benefit xxxxxxxxx can xxx when xxxx pay xxxx for x product xxxx what xxxx amp xx willing xx pay xxxxxxxx surplus xx the xxxxx profit xxxxxxxxx make xxxx they xxxx a xxxxxxx for xxxx than xxx minimum xxxxxx they xxx d xxxxxx Deadweight xxxx is xxx loss xx benefit xxxx a xxxxxx isn xxx t xxxxxxx well xx a xxxxxxxx consumers xxxx out xxxxxxx they xxx more xxxx they xxxxx in x fair xxxxxx Producers xxxx as xxxx can xxxxxx higher xxxxx Deadweight xxxx is xxxx because xxx monopoly xxxxxxxxx supply xxxxxxxx a xxxxxxxx In x fair xxxxxx consumer xxxxxxx is xxxxxxx because xxxxxx match xxxx it xxxxx to xxxx the xxxxxxx Producer xxxxxxx is xxxx covering xxxxxxxxxx costs xxxxxxxxxx loss xx zero xxxxxxx the xxxxxx runs xxxxxxxxxxx with xx shortage xxxx is x table xxxx contrasts xxx two xxxxxxxx Monopoly xxxxxxxx Optimal xxxxxxxxxxxxxx Surplus xxxxxxx LargerProducer xxxxxxx Larger xxxxxxxxxxxxxxxxx Loss xxxxxx SmallerTotal xxxxxxx Smaller xxxxxxMore Articles From Finance
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