Saudi Electronic University Economics Cost Supply & Demand Problems Questions

User Generated

znekvi10

Business Finance

Saudi electronic university

Description

yes her

Problem 1

Bill can produce either tables or chairs. Bill can work up to 10 hours a day. His production possibilities are given in the table below:

Tables

Chairs

0

100

10

80

20

60

30

40

40

20

50

0

  • Construct the production possibilities frontier (PPF) for Bill. Put tables on the Horizontal axis and chairs on the vertical axis.
  • What is Bill’s opportunity cost of producing one additional table?
  • What is Bill’s opportunity cost of producing one additional chair?
  • Currently Bill is producing 20 tables and 40 chairs.
  • Is this allocation of resources efficient? Why?
  • Show this allocation on the graph and advise Bill how he can be more efficient.

Problem 2

Suppose the market for corn is given by the following equations for supply and demand:

QS = 2p − 2

QD = 13 − p

where Q is the quantity in millions of bushels per year and p is the price.

  • Calculate the equilibrium price and quantity.
  • Sketch the supply and demand curves on a graph indicating the equilibrium quantity and price.
  • Calculate the price-elasticity of demand and supply at the equilibrium price/quantity.
  • The government judges the market price is under expectations and announces a price floor equal to $7 per bushel.
  • Would there be a surplus or a shortage?
  • What would be the quantity of excess supply or demand that results?
  • Use the graph to show you results.

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Explanation & Answer

Hi. Here is the solution. I you have any other question, just let me know. Thank you😊

Running Head: ECONOMICS PROBLEM SOLVING

Economics Problem Solving
Student Name
Name of Professor
Institutional Affiliation
Course Title
Date

1

ECONOMICS PROBLEM SOLVING

2

Problem 1
i.

The production possibilities frontier (PPF) for Bill
Bill can either produce 0 chairs and 50 tables or 100 chairs and 0 tables. Therefore, the
curve for the PPF has a horizontal intercept of 50 and vertical intercept of 100 as shown
in the graph below.

PPF for Bill
120
100

Chairs

80
60

Chairs

40

Linear (Chairs)

20
0
0

10

20

30

40

50

60

Tables

ii.

Bill’s opportunity cost of producing one additional table
= number of chairs sacrificed / number of tables produced
= 100/50 =...


Anonymous
Really helpful material, saved me a great deal of time.

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