d. pivot XXXXXX XXX "X" XXXX.
XXXXXX (17) – (A) shift outward, XXXXXXXX XX its initial position
XXXXXXXXXXX: XXXXXX XXXXXXXXXX represents XXX XXXXXXX quantities XX XXXXX / XXXXXXXX a consumer can buy given XXX income. The XXXXXXXX in XXXXXX XXXX allow XXX XX buy more. XX a result, XXXXXX XXXXXXXXXX will XXXXX XXXXXXX.
XXXXXX for Problem 18
18. From the XXXXXXXXXXXX curves in the figure XXXXX, which XX XXX following statements is correct?
a. Point A XX preferred equally XX point E.
b. Point X XX preferred XXXXXXX to XXXXX X.
c. XXX bundle associated with point X contains XXXX XX-XX's XXXX that XXXXXXXXXX with XXXXX X.
d. XXX XXXXXXX along indifference curve I1 XXX preferred to those along XXXXXXXXXXXX curve I2.
XXXXXX (XX) – (X) Point A is XXXXXXXXX XXXXXXX to XXXXX C
Explanation: XXXXX X XX not preferred equally to XXXXX E XXXXXXX E represents more quantities XX both twinkies and XX-XX. XXXXXXXXXXX XX point X represents XXXX XXXXXXXXXX of XX-Ho XXXX XXXXXXXX. I1 will XXX XX XXXXXXXXXX XXXX I2 XXXXXXX XXXXXX XXXXXXXX less quantity XX both goods XXXX IX. Therefore, option (B) is XXXXXXX.
19. Suppose XX $5 XXX XXXXXXXX XXXXXXXX XXX the XXXXXXXX XX Yo-XX XX’s music XXXX his “Piazzolla: Soul XX XXX Tango” XXXXX XX 3 XXXXX. If the substitution XXXXXX of XXX XXXXX decrease from $5 XX $X is X song, and the XXXXXX effect XX X XXXXX, what XXXXXX will XXX price change XXXX on the number XX XXXXXX consumers XXXXXXXX XXXX the Piazzolla’s album? (2 XXXXXX)
Answer (19) – XX XXX relative price of a XXXX falls, XXX substitution effect XXXXXXX that people XXX XXXX of XXXX XXXX and XXXX XX XXX substitutes. XX this XXXX, XXXXXXXXXXXX effect XXX XXXXX $X XXXXXXXX in XXXXX is X song XXXXXXX XXXXXX effect XXX every $X XXXXXXXX in price XX 3 songs. XX XXXXXXX XXXX XXXXXXXX will substitute XXXX of XX-Yo XX’s music as XXX price XXXX. XXX XXXXXXXX XXXXXX XXXX be XXXX XXX XXXXX XXXX XXXXXXXX XXX XXXXXXXX demanded will XXXXXXXX.
20. XXX XXXXX XX XXXXX his own business. XXX XXXXXXXX he wants XX XXXXX XXXX XXXXXXX XXXX he purchase a factory XXXX XXXXX $XXX,000. XXX XXXXXXXXX XXX $XXX,000 in the bank XXXXXXX 3 XXXXXXX XXXXXXXX per year. XX XXX purchases the factory XXXX XXX own money, what is the annual implicit opportunity XXXX XX purchasing XXX factory?
a. $0
b. $3,000
c. $XX,000
d. $XX,000
XXXXXX (20) – (X) $XX,000
XXXXXXXXXXX: If XXX purchases factory XXXX XXX own money he will only earn interest XX XXXXXXXXX $100,000 ($500,000 - $XXX,000). XXX interest XX $12,XXX ($400,000 × X%) foregone will be XXX XXXXXX XXXXXXXX XXXXXXXXXXX XXXX.
21. X XXXXXX-maximizing firm will XXXX down in the short XXX when
a. XXXXX is XXXX XXXX XXXXXXX variable cost.
b. XXXXX is XXXX XXXX average XXXXX XXXX.
c. XXXXXXX revenue XX greater marginal XXXX.
d. XXXXXXX XXXXXXX XX XXXXXXX than XXXXXXX fixed XXXX.
Answer (21) – (X) price XX less than XXXXXXX XXXXXXXX XXXX
XXXXXXXXXXX: In XXXXX run, profits are maximized at a level XX output where marginal XXXXXXX (XX) XX equal to the marginal XXXX (XX). XX a general rule, the firm XXXX continue to XXXXXXX as long as price XXXXXXX average XXXXXXXX costs. When price XX XXXX XXXX XXXXXXX variable cost, XXX XXXX XXXX XXXX down in XXX short-run as it XXXXXX XXXXX its fixed XXXXX.
XX. In XXX long run, XXX XX a XXXX's costs XXX XXXXXXXX. In XXXX case XXX XXXX criterion XXX a profit-XXXXXXXXXX firm XX XX
a. XXXXXXXX XX price XX XXXX XXXX average XXXXX cost.
b. XXXXXXXX XX price is greater than average total XXXX.
c. shutdown XX XXXXXXX revenue is greater XXXX average fixed cost.
d. XXXXXXXX if average revenue XX greater than XXXXXXXX XXXX.
XXXXXX (XX) – (X) shutdown if price is less than average XXXXX cost
Explanation: XXXX reasoning XX described in XXXXXX XX XXXXX XXX be applied XXXX XXXXXX XXXX in the XXXX XXX all costs XXX variable. When price is less XXXX average XXXXX XXXX XXX XXX positive levels XX XXXXXX, the XXXX XXXX XXXX XXXXXXXXXX XXXXXX which XXXXXXX in an XXXXXXXX shut XXXX.
XX. XXXXXXX monopoly XXXXX do XXX XXXX XX compete with XXXXX firms, XXX outcome in a XXXXXX XXXX a XXXXXXXX XX XXXXX
a. not in XXX XXXX XXXXXXXX of society.
b. one XXXX fails to maximize XXXXX XXXXXXXX well-being.
c. XXXXXXXXXXX.
d. All XX XXX XXXXX XXX correct.
XXXXXX (XX) – (D) XXX XX the XXXXX are correct
Explanation: Monopoly causes inefficiencies because XXXX XXXXX is charged XXX less quantity and it XX XXXXX to XXXXXXX the XXXXXXXXX of only XXXXXXXX XXXXXX and XXX XXX society XX a XXXXX. For this reason, it XX XXXX not in XXX XXXX interest XX XXXXXXX.
24. XX XXX XXXXXX XXXXX, the marginal XXXX curve XXX a monopoly XXXX is depicted XX curve
a. X.
b. X.
c. X.
d. X
XXXXXX (24) – (C) Curve C
XXXXXXXXXXX: XXX a monopoly there is a price effect i.e., a monopolist need to reduce XXXXX in order to sell additional XXXXX. XXXXXXXXX, marginal cost XXXXX for XXXXXXXX XXXXXX is upward XXXXXXX as marginal costs rises XXXX XXX increase in output. On the XXXXX hand, XXXXX XXXX XXXXXX for XXXXXXXXXX XXX XXXXXXXX sloping.
XX. XX XXX figure XXXXX, total XXXX curve XXX a monopoly firm XX XXXXXXXX XX curve
a. A.
b. B.
c. C.
d. D.
XXXXXX (25) – (B) XXXXX B
XXXXXXXXXXX: See XXXXXXXXXXX in answer XX.
CONGRATULATIONS! XXX ARE XXXXXXXX. THE XXXX XX OPTIONAL XXXX B. EXTRA XXXXXX. XXX XXX XXX XXXXXXXXX to XX XXXX section. XX obtain XXXX XXXXX XXXXXX, you must show all XX XXXX XXXX for XXXXXXXX XXXXXXXXX calculations. (10 XXXXXX)
E.C. 1: Suppose XXXX instead XX a XXXXXX-demand diagram, you are XXXXX the following information:
X s = 100 + X###i
/i###
Q d = 400 - 2###i
From this XXXXXXXXXXX XXXXXXX equilibrium XXXXX XXX quantity. (2 XXXXXX)
Answer (EC-X)
The XXXXXXXXXXX XXXXX XXXX XX the XXXXX XXXXX Q s = X d. Therefore,
XXX + 3P = XXX – XX
3P + 2P = XXX – XXX
XX = 300
X = 60
XXX XXXXXXXXXXX XXXXX is XXXXXXXXX XX per XXXX.
XXXXXXXXXXX XXXXXXXX can XXX XX worked out by XXXXXXX XXX XXXXX XX P XXX XXXXXXX for Q. XXXXX,
X s = XXX + 3(60)
= 100 + 180
= 280 XXXXX
Or;
X d = 400 – X(60)
= 400 – 120
= 280 Units
XXXXXX maximizing quantity XX 280 units.
X.X. X: XXXXXX a graph demonstrating XXX XXXXXXXXXXXXX that would prevail in a perfectly competitive market where XXXXX are XXXXXXXXXXXX XXXXXXXX XXXXXX. Identify costs, revenue, XXX XXX economic XXXXXX XX your XXXXX. XXXXX XXXX XXXXX, determine XXXXXXX an individual XXXX XXXX shut down in XXX short run, or choose to XXXXXX in XXX market. Explain XXXX answer. (6 XXXXXX)
Answer (XX-X)
To determine XXXXXXX or XXX an individual XXXX will XXXX XXXX in the XXXXX XXX, XXXXXXXX and average XXXXXXXX costs needs to XX XXXXXXXX. XX the XXXXX XXX, a XXXX XXX XXXXXX XX XXXX in the XXXXXX as long XX its XXXXXXX XXXXXXXX XXXX is below Po. XXXX it rises XXXXX XXX Po level, XXX firm will shut down in the short run.
E.X. 3: There XXX been much discussion of XXXXXXXXXXXX XXXXXXXXXXX and XXXXXXX gas delivery XXXXXXXXX in XXX United States. Using XXXX XXXXXXXXXXXXX of monopolies, XXXXXXX XXX likely XXXXXX XX XXXXXXXXXXXX on XXXXXX in these XXX industries. (X Points)
XXXXXX (EC-X)
XXX main XXXXXXXXX XX a monopolist is to XXXXXXX XXXXXXX possible XXXXXX level XXX XXXXXX the maximum possible price. XXXXXXX or XXX Electricity XXX XXXXXXX XXX XXXXXXXXXX in XXXXXX XXXXXX should XX deregulated depends XXXXXXXXX on XXX likely impact XX XXXXXXXXXXX. If the XXXXXX is XXXXXXXXXXX, deregulation will XXXXX XXXXXXXXX in XXXXX XXX XXXXXXX XXXXXXXX specifically to lower and middle income XXXXXXXXX. XXXXXXX, if XXXXXX is not XXXXXXXXX competitive, it XXXX cause inefficiency i.e., XXXXXXXXXX XXXX XX XXXXX and XXXXX XXXX XX XXXXXX in XXXX areas. XXXXXXXXXXX, it will also hurt XXXXXXXXXX XXXXXXXX. To XX XXXXXXXXX, XXXXXXXXXXXX XXXXXX XXXXXX in increasingly XXXXXXXXXXX XXXXXXX.