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Economics Problems




Question;1. A horse walks into a bar. The bartender says, ?Why the long face?? The horse says, ?I am willing to buy as much beer as you will sell me, but I am only willing to pay $3 for it.?1 The bartender has a total cost curve of T C(q) = q^2? q.a) What is the Bartender's marginal and marginal cost?b) How many beers will the bartender sell the horse?c) Suppose the bartender also incurs a non-sunk fixed cost of $9 (electricity) if he chooses to open the bar. Would he choose to open if the horse is his only customer? Explain2. Consider a Popsicle stand that sells in a perfectly competitive market. The Popsicle stand has variable costs related to labor and materials of 2q^2-1/2q It has mortgage on the stand that costs $5. Assume the market is illiquid so that the stand could not sell its assets to another buyer. If it chooses to operate, it must pay $3 in electricity to keep the Popsicles frozen throughout the day.(a) What are the stand?s non-sunk?xed costs? What are the stand?s sunk?xed costs?(b) What is the supply curve for the Popsicle stand?(c) How many Popsicles will the stand produce if the price is $7.50?3. For each of these outcomes. Explain wheter it can be the long-run equi-librium:a) There are 20 firms each producing 8 units with TC(Q)=q^2-1/4q and P=20b) There are 100 firms each producing 1 unit with TC(Q)=4Q^3-1/2Q^2+Q with P=34/94. Consider the market for frozen concentrated orange juice, which is a constant-cost industry. The long-run total costs of production are T C(Q) = Q^3? 2Q^2 + 4Q. The demand is given by Q = 80? 3P(a) What is the long-run equilibrium price?(b) How many?rms will enter the market?(c) How much output will each?rm produce?


Paper#57637 | Written in 18-Jul-2015

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