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- An individual's demand for physician office visits per year is Q=10-(1/25)P, where Pis the price of an office visit. The marginal cost of producing an office visit is $100.a. Ifindividuals pay full price for obtaining medical services, how many office visits will they make peryearb.Ifindividuals must pay only a $25 copayment for each office visit, how many office visits will they make per year?c.What is the deadweight loss to society associated with not charging individuals for the fall cost of their health care?PDemand QDemand PSupply QSupply $10 0 $1 2 $9 3 $2 4 $8 6 $3 6 $7 9 $4 8 $6 12 $5 10 $5 15 $6 12 $4 18 $7 14 If the Government creates a quota of 6 units to reduce the consumption of the dangerous product, what will the price of the good be in the marketplace? How much deadweight loss is there? How much of the deadweight loss came from the consumers?A computer store sells WP and SS. Given below are themaximum amounts two consumers will pay for these goods and for a bundle that contains bothgoods. WP SS Bundle carolina $100 $90 $190 shawn $90 $40 $130 (a) What is the firm’s revenue if it sells the WP at a price of $90 and the SSat a price of $90? The goods are only available individually and not as a bundle. Please showyour calculations.(b) Will the firm charge $130 or $190 for the bundle if it wants to earn maximum revenue?Assume that the goods are only sold as a bundle and not available separately. Please explain.(c) Will selling individually or selling a bundle result in higher revenues?
- Suppose tuition fees for a university increase from £3,000 to £9,000. Afterthe increase, enrolment drops by 5%.a) Calculate the price elasticity of demand for education at this university.Explain.b) Do tuition revenues at this university increase or decrease following thetuition fee change? How is this related to the price elasticity of demand foreducation at this university? Explain.c) Focusing on welfare (private and social costs and benefits), give the maineconomic argument(s) as to whether the government should subsidizehigher education or not, and if so by how much. Provide sufficient detail for your argument(s).d) In some countries higher education is provided free of charge to allstudents. Does this make such higher education a public good? Explain.e) Explain why setting up a cartel and maintaining collusion may be difficultin general.f) Explain how a maximum tuition fee of £9000 imposed by the government may facilitate collusion between universities.a) If the only goal of a regulator of a natural monopoly firm that charges a uniform price is to ensure that the firm produces the socially optimal level of output, and the regulator has the authority to order the firm to do so, explain why this power could not be exercised when the viability of the firm is taken into account. b) Explain why a regulator, whose sole objective is to ensure that a monopoly firm produce the socially optimal output, would have no need to do anything if the firm were a perfectly discriminating monopoly. c) If the market demand curve is common knowledge for a natural monopoly firm and a regulator, but unlike the firm, the regulator has no information about the firm’s cost curves. Explain how a regulator could incentivize the firm to produce the socially optimal output, bearing in mind that the regulator does not even know which level of output is socially optimal?a) What are the output and price where the firm’s profit is maximum? What is the firm’s economic profit? Show solution. b) Determine the deadweight loss for this market. What is the source of the deadweight loss in a monopoly? c) If government regulators where to ask the firm to charge a price and quantity that would be socially (or allocatively) efficient, what would these price and quantity be? At this output and price, what would happen to the consumer surplus, producer surplus and total surplus compared to the situation under monopoly.
- Considermarketforagoodcharacterizedbythefollowinginverse demand and supply functions: PX = 10 − 2QX and PX = 2 + 2QX.a. Compute the surplus received by consumers and producers.b. Now suppose all manufacturers of this good are to pay a lump tax of $0.10that will be used by the government regulators to defray some of the environmental cost imposed by this good’s production. What will be the new surplus received by consumers and producers?c. Based on your results in part ‘b’ above, how will you evaluate the impact of this tax policy on the society? ExplainA company is considering building a bridge across ariver. The bridge would cost $2 million to build andnothing to maintain. The following table shows thecompany’s anticipated demand over the lifetime ofthe bridge:Price per CrossingNumber of Crossings,in Thousands$8 07 1006 2005 3004 4003 5002 6001 7000 800a. If the company were to build the bridge, whatwould be its profit-maximizing price? Would thatlevel of output be efficient? Why or why not?b. If the company is interested in maximizing profit,should it build the bridge? What would be itsprofit or loss?c. If the government were to build the bridge, whatprice should it charge?d. Should the government build the bridge?Explain.Using the MR = MC rule, what is the profit-maximizing level of output (in thousands of KWHs)? What price will Putrid charge for the profit-maximizing level of output? Assume that if electricity is supplied by competitive firms, the market price is 55 and the quantity supplied is 8 (‘000 KWHs)? What is the amount of the deadweight loss to society of producing electricity by monopolist Global Gas and Electric? Determine and compare the amount of consumer surplus and producer surplus if the service is provided by competitive firms and by the monopolist.
- (J) Suppose the production process of a particular good creates a negative externality such as pollution. Other things being equal, would society be better off if this good were produced by a perfectly competitive market or by a monopoly? a. Society would be better off if this good were produced by a perfectly competitive market, because a perfectly competitive market responds to consumers' desires in the long run b. Society would be better off if this good were produced by a perfectly competitive market, because a perfectly competitive market will produce the quantity where Marginal Revenue equals Marginal Cost c. Society would be better off if this good were produced by a monopoly,A monopolist faces a demand curve given by q = 32 − 0.5p. Its costs are given by 0.5q2 + 100. (a) What is the monopolist’s profit maximizing choice of output? At what price does it sell its product? (b) Draw a graph that illustrates the monopolist’s choices. (c) If this were a competitive market, what would be the equilibrium price and quan- tity? (d) If the monopolist were forced to sell its output at the price that would arise in the competitive market, would it still be able to make a profit?Don't use chatgpt and make sure you include the graphs needed (a) Suppose in a competitive market, the market demand curve for salt is infinitelyinelastic. What is the impact of a per-unit tax (i.e. a specific tax) on the priceof salt that consumers pay?(b) Suppose the demand curve for butter is Q = 50 − 3P and the supply curve isQ = 2P. Suppose the government announces a per-unit tax of 1 on the priceof butter. Tax on butter can be seen as a ’fat tax’. What is the overall effectof a fat tax on the consumers? (c) If you were a policymaker and wanted to promote a fat tax in the UK, whatwould you cover in your policy campaign?