ppf will be a perfectly straight line (constant opportunity costs)
TRANSCRIPT
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PPF will be a perfectly straight line (constant opportunity costs)
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AA = SwitzerlandCA for Chocolate = FranceCA for Cheese = Switzerland
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By comparing the MU/P for A and the MU/P for B. One should first purchase the one with a HIGHER MU/P (Marginal Utility per dollar)
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- 0.8 (inferior)+ 0.8 (normal)+8.0 (‘more normal’)
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+ 0.5 (substitutes)- 0.5 (compements)
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Accounting Profits? YES ($80,000)Economic Profits? NO (-$20,000 … an
econ. Loss)TVC = $470,000 (TC-TFC=TVC)
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TR = P * QEconomic Profit = TR – TC
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$800,000$100,000
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HEIGHT: Value of the tax or subsidyWIDTH: The change in quantity as a
result of the tax/subsidy.
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MBg4 = 2 cents. At P=5, George buys 2, Ringo buys 3. Total CS=25 cents [50-25]
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Q TC0 0
1 5
2 9
3 14
4 20
5 28 $5, $5, Profit Max = 4 units
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Q TC0 5
1 15
2 20
3 30
4 45
5 65 $5, $15, $5, $15
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Accounting profit of $5,000 @ TR=$105,000
Normal profit @ TR=$130,000Economic profit of $50,000 @
TR=$180,000
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No (P does not equal MC)Yes (P > ATC)No (because MC ≠ MR)
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BDCannot tell (it’s where MC=MR… no MR on
graph)
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At P2 or P1At P, you would shut down in the short
run, so you would earn a loss equal to your fixed costs.
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Draw graph showing MSC > MPCOVERALLOCATEPER UNIT TAX
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Non-Rival & Non-ExcludableIe. national defense, free public radio,
free music downloads…etc.
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QL Total Output
(per day)
0 20
1 35
2 55
3 65
4 72
5 76
6 77
$80 (same for each worker… MFC = Wage
$40 [4 units * $10 each]3 [4th would cost 80, but only
worth 70 (MRP)]
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Ed = 20/100 = 0.2 = relatively inelastic [<1]
Or using TR Test… Price increases (10 cents 20 cents)… TR increases ($10 million to $16 million)
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Firm’s Demand Curve is horizontal… AKA - They can already sell as many as they want at the market price, so lowering price will lose them profits
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Because, if you add a marginal that is BELOW the average… it pulls the average down. If you add a marginal that is ABOVE the average, it pulls the average up.
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NO ANSWER – cannot solve, because there is no way to determine your total costs.
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TR = $100,000
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Draw graph showing MSB > MPBUNDERALLOCATEDWL will be the triangle pointing toward the
right (toward Socially Optimal point)
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Demand increasesBecause of the demand for factors are
derived from the demand for the product (DERIVED DEMAND)
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Ed = 0/x = 0 = perfectly inelastic(demand does not respond at all to price change)
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Productive: NOAllocative: YES
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4 Tacos & 3 Pizzas [TU = 80 utils]
Q Tacos TU Tacos Q Pizza TU Pizza
1 12 1 20
2 21 2 36
3 28 3 48
4 32 4 54
5 30 5 55
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Laws, such as the Sherman Antitrust Act, meant to promote/enforce competition in the industry.
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Q TC ($)0 20
1 50
2 75
3 110
4 150
5 210
6 300
Profits maximized at 4 units
MC of 6th unit = $90AVC at 3 units = (110-20)/3
= $30TFC = $20 (constant)
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Draw Step graph. MB = additional benefit per unit. At P=5, David buys 3, Bill buys 3. Total CS=14 dollars.
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Draw Step graph. MB = additional benefit per unit. At P=3, Lydia buys 4, Anna buys 3. Total CS=10 cents.
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Q MC0 --
1 5
2 4
3 5
4 6
5 7 Profit Max. = 3 units [MC=MR]
TC at 4 units = $20AVC at 3 units = 14/3 =
$4.67
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Q TC0 10
1 16
2 21
3 28
4 36
5 50 Profits maximized at 4 units
MC of 3rd unit = $7ATC at 4 units = 36/4 =
$9
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Q MC0 --
1 25
2 20
3 24
4 30
5 32 25+20+24=$69Profit is maximized at 3
units (profit of $6)
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4 pencils, 3 pens [TU = 58 utils]
Q Pencils
TU Pencils Q Pens TU Pens
1 8 1 15
2 15 2 27
3 20 3 35
4 23 4 42
5 25 5 45
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3 Gasoline, 3 Milk [TU = 220 utils]
Q Gasoline
TU Gasoline
Q Milk TU Milk
1 60 1 44
2 99 2 84
3 120 3 100
4 135 4 112
5 144 5 120
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MC=MB !!!!!!!!!!!!!!!!!!!