1. Consider a small, isolated island with a coconut oil industry and three villages. Coconutoil can be produced at a constant per-unit cost of 50 pesos per liter. All the oil is soldin the villages, and due to the close proximity of the villages to each other, the retailprice in all three villages must be the same. The three villages' demand for coconut oilis given by the following indirect demand functions (where Q, is the amount of coconutoil (in liters) consumed by village i and P, is the price (in pesos per liter) that the peopleliving in village i are willing to pay for the marginal liter):P(Q1) = 210·유Q; P(Qa)-400Q2: P(Qa) = 600 –The production of coconut oil creates environmental damage, mostly via deforestationassociated with growing coconut trees, but also via water and air pollution from chem-icals used in the oil extraction industry. The marginal damage due to deforestation isMDF(Q) = 10 + +Q (pesos per liter of coconut oil produced), whereas the marginaldamage due to pollution is MDp(Q) = 10 (pesos per liter of coconut oil produced).(a'quantity ų to market price P.Don't forget the "kinks" that arise form the fact that not all villages are demanding oil at allprices.Find the aggregate demand function for coconut oil, linking aggregate(b)Find the aggregate marginal damage function.(c)in the coconut oil market taken in isolation (ignoring the effects of environmentaldamage). Call this output level Q.Find the level of coconut oil production that maximizes total surplus(d)(Q*), which maximizes total surplus after accounting for environmental damage.Find the socially optimal (truly efficient) level of coconut oil production(e)producers. What price will be charged (P.) and how much oil will be produced(Q.)?Suppose coconut oil on the island is produced by perfectly competitive(f)levels Q; and Q? Why?How does the competitive output level Q. compare to the benchmark(g)by introducing a per-unit tax on coconut oil production. Determine te, the level oftax (in pesos per liter) that achieves this goal.Suppose the government wants to implement the socially optimal level(h)in part (g) is put in place?What will be the competitive equilibrium price after the tax computed(i)tax in each village separately.Compute the quantities of coconut oil consumed before and after the(i)by the tax, and why?Based on your answer to part (i), which village was the most affected

Since we only answer maximum 3 subparts, a-c will be answered here. Please reupload the question…

(a' quantity y to market price P. Find the aggregate demand function for coconut oil, linking aggregate Don't forget the "kinks" that arise form the fact that not all villages are demanding oil at all prices. (b) Find the aggregate marginal damage function. (c) in the coconut oil market taken in isolation (ignoring the effects of environmental damage). Call this output level Q;. Find the level of coconut oil production that maximizes total surplus

(a' quantity y to market price P. Find the aggregate demand function for coconut oil, linking aggregate Don't forget the "kinks" that arise form the fact that not all villages are demanding oil at all prices. (b) Find the aggregate marginal damage function. (c) in the coconut oil market taken in isolation (ignoring the effects of environmental damage). Call this output level Q;. Find the level of coconut oil production that maximizes total surplus

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Questions 1-17 refer to below statement and demand and supply functions. Suppose that demand and supply curves for avocado in Brooklyn are as the followings: Qd = 144 − 24P Qs = -36 + 12P where Qd and Qs are quantities demanded and supplied in tons respectively, and P is the price of avocado in dollars per kg? 1) If price elasticity of demand for avocado at price P* is equal to -2/3, how much is P*? a) $2.00 b) $2.20 c) $2.40 d) $2.60 e) $2.80 2) What is quantity demanded at price P* at which price elasticity of demand for avocado equals -2/3? a) 82.2 tons b) 83.2 tons c) 84.4 tons d) 85.2 tons e) 86.4 tons 3) If price elasticity of supply for avocado at price P* is equal to 2.5, how much is P*? a) $2 b) $3 c) $4 d) $5 e) $6 4) What is quantity supplied at price P* at which price elasticity of supply for avocado equals 2.5? a) 6 tons b) 12 tons c) 18 tons d) 24 tons e) 30 tons 5) What is market clearing equilibrium price and quantity in Brooklyn avocado market? a) $3; 20…
Suppose you are the economic adviser ofa company producing three brands of mobile pnones;Nokia 10, Samsung X and iPhone 7. Suppose further that, your company currently sells 120units of iPhone Z at e800 per unit, 150 units of Samsung X at e800 per unit and 200 units ofNokia 10 at e100 per unit, but in a bid to maximize profit, the company's managing directorproposes an increase in price of Samsung X from e800 to e1000 per unit for which quantitydemanded is anticipated to fall from 150 to 100 units; iPhone Z from e800 to e 1200 per unitfor which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from100 to 200 per unit for which quantity demanded is expected to fall from 200 to 100 unitsUsing the mid-polint formula. compute the price elasticity of demand for each brand.From your answer in i, what is the type and economic interpretatiom of each brand'sii.value of elasticity.
1. Suppose you are the economic adviser of a company producing three brands of mobile phones; Nokia 10, Samsung X and iPhone Z. Suppose further that, your company currently sells 120 Units of iPhone Z at ¢800 per unit, 150 units of Samsung X at ¢800 per unit and 200 units of Nokia 10 at ¢100 per unit, but in a bid to maximize profit, the company’s managing director proposes an increase in price of Samsung X from ¢800 to ¢1000 per unit for which quantity demanded is anticipated to fall from 150 to 100 units; iPhone Z from ¢800 to ¢1200 per unit for which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from ¢100 to ¢200 per unit for which quantity demanded is expected to fall from 200 to 100 units. I. Using the mid-point formula, compute the price elasticity of demand for each brand. II. From your answer in i, what is the type and economic interpretation of each brand’s value of elasticity
Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,00 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in each market is given by QE=4,000,000−100PE and QU=1,500,000−20PU where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. a. What quantity of BMWs should the firm sell in each market, and what should the price be in each market? What should the total profit be? (round dollar amounts to the nearest penny and quantities to the nearest integer) In Europe equilibrium quantity is 1,000,000 cars at an equilibrium price of $30,000 In United States equilibrium quantity is 550,000 cars at an equilibrium price of $47,500 BMW makes a total profit of $15.125 billion. I Need help with this part: If BMW were forced…
Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,00 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in each market is given by QE=4,000,000−100PE and QU=1,500,000−20PU where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. a. What quantity of BMWs should the firm sell in each market, and what should the price be in each market? What should the total profit be? (round dollar amounts to the nearest penny and quantities to the nearest integer) In Europe equilibrium quantity is 1,000,000 cars at an equilibrium price of $30,000 In United States equilibrium quantity is 550,000 cars at an equilibrium price of $47,500 BMW makes a total profit of $15.125 billion. I Need help with this part: If BMW were forced…
15. Given that the U.S. government mandates the use of ethanol as a partial substitute for gasoline (10% by volume), and that ethanol manufactured in the U.S. is made from corn; how will the supply of ethanol, the demand for ethanol, as well as its equilibrium price and quantity, be affected by the following event: Development of a new highly efficient method of storing electrical energy (e.g. a light weight, yet structurally strong, composite material that can serve as the car body and store electricity as well). c) Demand will decrease. i) Equilibrium Price will decrease. a) To the extent the amount of ethanol additive in gasoline is determined by government fiat, neither demand for not supply of ethanol will be affected unless the government changes its requirements. g) Equilibrium Quantity will decrease. j) Equilibrium Price and Quantity will remain unchanged. h) Equilibrium Price will increase. e) Supply will decrease. d) Supply will increase. b) Demand will increase. f)…
12. Given that the U.S. government mandates the use of ethanol as a partial substitute for gasoline (10% by volume), and that ethanol manufactured in the U.S. is made from corn; how will the supply of ethanol, the demand for ethanol, as well as its equilibrium price and quantity, be affected by the following event: Publication of a scientific study which concludes that the production of ethanol from corn in the United States and its use as fuel produces more carbon dioxide emissions than the use of gasoline. There may be miltiple answers f) Equilibrium Quantity will increase. d) Supply will increase. g) Equilibrium Quantity will decrease. a) To the extent the amount of ethanol additive in gasoline is determined by government fiat, neither demand for not supply of ethanol will be affected unless the government changes its requirements. e) Supply will decrease. j) Equilibrium Price and Quantity will remain unchanged.…
5. Suppose the demand for crude oil is given by the function: Q = -2000P + 70,000 where Q is quantity of oil in thousands of barrels and P is price per barrel of oil. Suppose there are 1000 identical small crude oil producers each with marginal cost MC = Q + 5 Where Q is the output of the typical firm: a) Derive the market supply curve and the equilibrium price and quantity b) Suppose a practically infinite supply of crude oil is discovered in North- Eastern Province (NEP) by a would-be price-leader and that the oil can be produced at constant average and marginal cost of Kshs.15 per barrel. If the supply behavior of the competitive firm described above is not changed by this discovery, how much should the price leader produce in order to maximize profits? c) What price and quantity will now prevail in the oil market? d) Graph (sketch) the results obtained above and show whether the consumer surplus increases as a result of the North-Eastern Province oil discovery? Indicate how the…
Assume that the demand for tuna in a small coastal town is given by p = 500,000/q1.5 where q is the number of pounds of tuna that can be sold in a month at p dollars per pound. Assume that the town’s fishery wishes to sell at least 5,000 pounds of tuna per month. a. How much should the town’s fishery charge for tuna in order to maximize monthly revenue? b. How much tuna will it sell per month at that price? c. What will be its resulting revenue?
Squeak eClean produces commercial sanitizer used to clean tanker trucks that haul liquid food products such as milk. This sanitizer a commodity like any other and at the wholesale level, there are many domestic and foreign producers that compete vigorously. Suppose you have the following estimated market demand and supply functions for the sanitizer. Qd = 248.08 + 2.2Y - 0.6PC + 1.2 PS - 4P Qs = - 10 + 2P In these equations, Q measures output in gallons per month (in 1,000’s), P is the price per gallon of the sanitizer, Y is annual average household income (in 1,000’s), PC is an index of commodity prices, and PS is the average price per gallon of other types of sanitizer. After gathering the latest data, you find that average household income is $36,400, the current level of the commodity price index is 110.6, and the average price per gallon of other types of sanitizers is $48.50. Find the current equilibrium price and quantity in this market. Find the equilibrium price and…
Table: Demand Schedule of Gadgets Price ofGadget Quantity ofGadgets Demanded $10 0 $9 100 $8 200 $7 300 $6 400 $5 500 $4 600 $3 700 $2 800 $1 900 $0 1,000 Reference: Ref 14-1 Table: Demand Schedule of Gadgets (Table: Demand Schedule of Gadgets) Use Table: Demand Schedule of Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets at a marginal cost of $2 and no fixed cost. Suppose that these two producers have formed a cartel, agreed to split production of output evenly, and are maximizing total industry profits. If Margaret decides to cheat on the agreement and sell 100 more gadgets, the market price of gadgets will be: Select one: a. $6. b. $7. c. $4. d. $5.
14. Given that the U.S. government mandates the use of ethanol as a partial substitute for gasoline (10% by volume), and that ethanol manufactured in the U.S. is made from corn; how will the supply of ethanol, the demand for ethanol, as well as its equilibrium price and quantity, be affected by the following event: Development of new genetically engineered bacteria that can efficiently convert high cellulose biomass (grasses, wood chips, etc.) into ethanol. b) Demand will increase. j) Equilibrium Price and Quantity will remain unchanged. g) Equilibrium Quantity will decrease. c) Demand will decrease. d) Supply will increase. f) Equilibrium Quantity will increase. e) Supply will decrease. h) Equilibrium Price will increase. i) Equilibrium Price will decrease. a) To the extent the amount of ethanol additive in gasoline is determined by 10 government fiat, neither demand for not supply of ethanol will be affected unless the government changes its requirements.