Description
Here is a homework assignment for my upper economic class. Econ 145
Homework #1: Chapters 2 – 8
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
Ok, here you go! Let me know if you need me to explain anything 😇 If you want anything else just write to me :)
Chapter 2:
1)
a) Equilibrium price is where QD = QS, so 200-4P=100, hence P=25
b)
c) consumer surplus = (50-25)*100*1/2 = 1250, producer surplus =
25*100=2500
d) This graph could explain the market for apartments in the short-run.
2)
a) The quantity demanded and the quantity supplied will be equal in equilibrium,
hence 10 + 0.5Q= 22 – 2.5Q, therefore Q=4, and the price is P=10 + 0.5 * 4 = 12.
b)
c) Consumer surplus = (22-12)*4*1/2=20, producer surplus = (12-10)*4*1/2=4
3)
a) Qd = Qs, so -100P+1150=400P-100, hence P=2.5 and thus Qe=400*2.5-100=900
b) -100P+1150=400P-350, hence P=3 and Qe=850
c)
d) Cs before = (11.5-0.25)*900*1/2=5062.5, Ps before = 0.25*900*1/2=112.5
Cs after = (11.5-7/8)*850*1/2=4515.625, change = -546.875, Ps after =
(7/8)*850*1/2=371.875, change = +259.375, total welfare change=-287.5
e) The consumer welfare for the market will remain unchanged as the market is
concerned just with the bottled water market and tap water may have different
utility to customers.
Chapter 3
1)
a) No not necessarily, an economist would argue that the optimal level is when the
marginal social benefit of pollution is equal to the marginal social cost of
pollution.
b) This would be true for pollution which has an infinite social cost, e.g. it is lethal
to humans and is uncontrollable, which could be explained by say volcanic
eruptions.
c) This statement is false for example with pollution from car usage as the pollution
from cars can be quantified as a cost and the benefit one gets from a car can be
compared to that value.
2)
a)
b)
3)
a) P= P1 + P2, (P1 and P2 are the inverses of the quantity functions), which is thus P
= 8+12-(0.05Q+0.2Q) thus P = 20 – 0.25Q
b) We must equate both the price functions, so 6+0.15Q=20-0.25Q, hence Qe=35
and Pe=20-0.25*35=11.25 million
4)
a) Competitive equilibrium: MPB equals MPC, hence 800-0.5Q=20+0.3Q, thus
Qc=975 and Pc=$312.50. Efficient equilibrium: MSB = MSC, hence 800-0.5Q=20 +
0.7Q, thus Qe= 650 and Pe=$475
b) Acceptable payment, p, needs to be larger than the marginal profit which will be
l...