Eco Assistance

1866 Words May 10th, 2011 8 Pages
Economic

Question 1: (a) Complete the following table of costs for a firm. (Note: enter the figures in the MC column between outputs of 0 and 1, 1 and 2, 2 and 3, etc.) Output (units) | TC($) | AC($) | MC($) | 0 | 55 | ---- | 30 | 1 | 85 | 85 | | | | | 25 | 2 | 110 | 55 | | | | | 20 | 3 | 130 | 43 | | | | | 30 | 4 | 160 | 40 | | | | | 50 | 5 | 210 | 42 | | | | | 70 | 6 | 280 | 47 | | | | | 90 | 7 | 370 | 53 | | | | | 110 | 8 | 480 | 60 | | | | | 130 | 9 | 610 | 68 | | | | | 150 | 10 | 760 | 76 | | (b) How much is total fixed cost at: (1) an output of 0 units?

Answer
The “0 units” total fixed cost is 55.

(2) an output of 6 units?
…show more content…
(b) How might you determine whether the pre-recorded music compact discs and MP3 music players are in competition with each other?

Answer
The pre-recorded music compact discs and MP3 music players are cross elasticity of demand. Cross elasticity of demand is the ratio of the percentage change in the quantity demanded of a good or service to a given percentage changes in the price of a related good or service.
The pre-recorded music compact discs and MP3 music players are substitute. So when pre-recorded music compact discs demand increase, the MP3 music players will decrease. When MP3 music players demand increase, the pre-recorded music compact discs demand will decrease.

(c) Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5 Answer The income elasticity of demand is positive, it is a normal good or service, so YED= +0.5, it is normal good or service. The income elasticity of demand is negative, it is an inferior good or service, so YED= -2.5, it is inferior good or service.

(d) Interpret the following Cross-Price Elasticities of Demand (XED) and explain the relationship between these goods. XED= +0.64 and XED= -2.6

Answer
The Cross-Price Elasticity of Demand is positive; it is substitutability between the two goods. So XED= +0.64, it is

More about Eco Assistance

Open Document