Log in
Economics
1
answer
0
watching
176
views

suppose that some market consists of 100 buyers and 10 sellers.Each buyer has an identical individual demand curve,
P=300-3Q
Each seller has an identical individual supply curve,
P=Q
The market demand curve will thus take the form P=a-bQ and themarket supply curve will take the form P=cQ+d. In the followingquestions, I want you to solve for a, b, c, and d.

3. What is the value of the “a” term in the market demandcurve?
4. What is the value of the “b” term in the market demand curve?(Use decimals. Round to two decimal places)
5. What is the value of the “c” term in the market supply curve?(Use decimals. Round to two decimal places)
6. What is the value of the “d” term in the market supplycurve?

suppose that some market consists of 50 buyers and 100 sellers.Each buyer has an identical individual demand curve,
P=200-4Q
50 sellers have an identical individual supply curve,
P=Q+40
The remaining 50 sellers have identical supply curves equalto
P=Q+20
The market demand curve will thus take the form P=a-bQ and themarket supply curve will take the form P=cQ+d (I want you to focuson the part of the supply curve where prices are such that allsellers are willing to sell the good). In the following questions,I want you to solve for a, b, c, and d.

7. What is the value of the “a” term in the market demandcurve?
8. What is the value of the “b” term in the market demand curve?(Use decimals. Round to two decimal places)
9. What is the value of the “c” term in the market supply curve?(Use decimals. Round to two decimal places)
10. What is the value of the “d” term in the market supply curve?

Watch
1
answer
0
watching
176
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Kelleb Mloyi
Kelleb MloyiLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Considering the demand side of a market for a good, it is reasonable to expect that:
i. demand curves for a given good are identical between consumers
ii. demand curves for a given good differ between consumers
iii. an individual has identical demand curves for different goods
iv. an individual has different demand curves for different goods

i
ii
iii
iv
i and iii
ii and iv

Suppose the market demand curve for a good is represented by the linear equation Q = 60 - 0.75P. If the market price were to increase from P = $20 to P = $40, then holding all other factors constant:

the quantity demanded would decrease by 10 units and total expenditures on the good would decrease by $400
the quantity demanded would decrease by 15 units and total expenditures on the good would increase by $300
the quantity demanded would decrease by 30 units and total expenditures on the good would increase by $1200
the quantity demanded would increase by 20 units and total expenditures on the good would decrease by $800
the quantity demanded would increase by 10 units and total expenditures on the good would increase by $100
the quantity demanded would increase by 25 units and total expenditures on the good would increase by $1000

A perfectly competitive firms supply curve for a good identifies the:
i. minimum quantity supplied at each price, holding all other factors constant
ii. firms minimum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant
iii. maximum quantity supplied at each price, holding all other factors constant
iv. firms maximum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant

i and ii
i and iv
ii and iii
iii and iv

Considering the supply side of a market for a good, if a firms supply curve were vertical, then:

the law of supply holds, and quantity supplied is completely insensitive to changes in price
the law of supply holds, and quantity supplied is highly sensitive to changes in price
the law of supply fails to hold, and quantity supplied is completely insensitive to changes in price
the law of supply fails to hold, and quantity supplied is highly sensitive to changes in price
none of the above

The determinants of supply are:
i. factors other than price that will affect the quantity of a good or service a firm is willing and able to purchase
ii. factors that affect a producers maximum willingness-to-accept to produce various quantities of a good
iii. factors that affect a producers minimum willingness-to-accept to produce various quantities of a good

i
ii
iii
i and ii
i and iii

The market supply curve for a good is derived by:
i. horizontally summing the supply curves of the individual firms in the market
ii. vertically summing the supply curves of the individual firms in the market
iii. summing the quantity supplied by each firm at a given price and then repeating this over the range of prices

i
ii
iii
i and ii
i and iii

If the level of technology used in the production of a good improves, and assuming the quality of the good does not change, then:
i. more output may be obtained with a given amount of inputs compared to before the technological improvement
ii. a given amount of output may be obtained with fewer inputs compared to before the technological improvement
iii. the firm will increase its use of other inputs, such as the number of workers it employs
iv. market demand for the good will increase

i
ii
iii
iv
i and ii
i, ii, and iii
i, ii, and iv
i, ii, iii, and iv

Considering the market for gasoline, which of the following would result in an increase in market supply?
i. a decrease in the price of gasoline
ii. an improvement in oil extraction and refining technologies
iii. an increase in the wage rates paid to gasoline refinery workers
iv. a decrease in the price of crude oil, a key input used to produce gasoline
v. the imposition of a federal gasoline tax aimed a decreasing the emission of greenhouse gases

i
ii
iii
iv
v
ii and iv
i, ii, and iv
i, ii, iii, and iv
i, ii, iii, iv and v

Suppose a market has two identical sellers. If each sellers supply function is given by P = 20 + Q, then the market supply function is:

P = 20 + 0.5Q
P = 20 + 2Q
P = 40 + Q
P = 40 + 2Q

From the market framework discussed in class and the readings, it may be concluded that in order for a good to be exchanged between a seller and a buyer, it must be that:

buyer maximum willingness-to-pay is greater than seller minimum willingness-to-accept
buyer maximum willingness-to-pay is greater than or equal to seller minimum willingness-to-accept
buyer minimum willingness-to-pay is greater than or equal to seller maximum willingness-to-accept
buyer minimum willingness-to-pay is greater than seller maximum willingness-to-accept

If the market demand function is given by P = 80 - 0.3Q and the market supply is given by P = 20 + 0.1Q, then the equilibrium price and quantity are:

P = $35 and Q = 150
P = $65 and Q = 150
P = $26 and Q = 60
P = $28 and Q = 80

Of concern are the affects of sustained summer droughts on the domestic supply of wheat. Noting that wheat is a primary ingredient in the production of bread and that potatoes are a substitute for bread, if the supply of wheat declines then it is reasonable to expect:

the price of wheat to fall, the supply of bread to increase, and the demand for potatoes to increase
the price of wheat to fall, the supply of bread to increase, and the demand for potatoes to decrease
the price of wheat to rise, the supply of bread to decrease, and the demand for potatoes to decrease
the price of wheat to rise, the supply of bread to decrease, and the demand for potatoes to increase
the price of wheat to rise, the supply of bread to increase, and the demand for potatoes to increase

the price of wheat to rise, the supply of bread to increase, and the demand for potatoes to decrease

Suppose a perfectly competitive market is initially in equilibrium. If market demand and supply decrease simultaneously, then equilibrium:

price will rise, but the equilibrium quantity may either rise, fall, or remain unchanged
quantity will rise, but the equilibrium price may either rise, fall, or remain unchanged
price will fall, but the equilibrium quantity may either rise, fall, or remain unchanged
quantity will fall, but the equilibrium price may either rise, fall, or remain unchanged

Considering the demand side of a market for a good, the consumer surplus derived by an individual:
i. is the difference between the maximum amount the consumer is willing to pay on each unit and the minimum prices that producers are willing to accept
ii. is the difference between the minimum amount the consumer is willing to pay on each unit and the price he/she
actually pays
iii. is the difference between the maximum amount the consumer is willing to pay on each unit and the price he/she actually pays
iv. will decrease if price increases

i
ii
iii
i and iv
ii and iv
iii and iv

Suppose the market demand for a good is described by the equation P = 120 - 2Q. If a change in market supply results in price decreasing from P0 = $80 to P1 = $70, then the resulting change in consumer surplus is:

$225
$400
$575
$625
$750

1. (12 points) Suppose a typical used car buyer is willing to pay $6000 dollars for a low-quality used car (Lemon), and $14,000 for a high-quality car (Plum). Also, suppose the market supply of Plums is given by QP = -60 +.01P and the market supply of Lemons is given by QL = -20 +.01 P. Let the typical buyer’s belief that a car of unknown quality is a Plum = z, so (1-z) is the probability that a car of unknown quality is a Lemon.

Assume that buyers are risk-neutral so that the price a buyer will offer for a car of unknown quality is given by:

P = z($14,000) + (1-z)($6000). Therefore P = $6000 + $8000z.


a) (8 points) State the equilibrium condition in this market.

z = QP/(QP + QL)















b) (4 points) Determine the two values of z that lead to a market equilibrium. .

z = 0

z = .252. (16 pointsSuppose a manufacturer is a monopoly. This manufacturer produces a good at MC = 8 and sells it to a retailer. The retailer is also a monopoly, and it sells the good bought from the manufacturer to consumers. The retailer has no additional costs other than the price they pay to the manufacturer. The retailer faces a demand curve P = 200 –4Q, where Q is the number of units sold.

a) What price will the manufacturer charge to the retailer?

PM = 104






b) What price will the retailer charge to the consumers?

PR = 152







c) If the two firms merged, what would be the price charged?

P = 104







d) If the two firms merged into a single firm, how much profit would the firm make?

Î = 2304







e) How much profit would the two firms make if they do not merge?

Î M = 1152

Î R = 576

Total Î = 1728





3. (8 points) Consider the case of a manufacturer (upstream firm) who sells a product to a retailer (downstream firm). For each of the following four possible situations carefully explain under which circumstances there is an incentive for the firms to vertically integrate. (You may assume the cost of vertical integration is zero).

Both firms are perfectly competitive

NO






Both firms are monopolies

YES






The manufacturer is perfectly competitive and the retailer is a monopoly

NO







The manufacturer is a monopoly and the retailer is perfectly competitive.

YES If the Retailer has a variable proportions production function. Otherwise, NO.



Target Statement for Assignment 8

When IT procurement managers do business across a transnational border (or choose which borders to negotiate across) it will be helpful for managers to be aware of what restraints or pressures exist on both sides of the border that will affect the negotiated price of the product or service being acquired. The understanding that Garrett’s entire pricing theory depends on the macroeconomic (and hence also political) environment emerges from considering relations between contract pricing and economic theory, specifically, the “reservation price” and “economic calculation problem”.

A fixed-price strategy in Garrett’s account does not mean a price that is fixed legally; it means a price that is determined by negotiation between free parties, such as is described in Ch. 8, pp. 105-106. That is, in Garrett’s pricing theory there is a transaction pricing calculation performed on each side of the transaction. Contract pricing is a decision, about which what matters is not the type of contract but the locus of the decision, that is, who makes the decision, and under what constraints?

Garrett’s Chapter 8 answers: buyer and seller make the decision. In a free-market economy, the pricing decision would be entirely an outcome of their negotiation. In an interventionist economy, the decision is in part an outcome of the buyer-seller negotiation; however, the cost of such interventions as taxes, regulations, currency instability, or contract impairment by monetary inflation, and any price caps or floors are built into or reflected by the seller’s offering price.

In free market economic planning where there is zero central economic planning, a first approximation to a contract price that is freely set by buyer and seller is the reservation price or “walk-away” price for the buyer. The seller, too, has a “walk-away” price. The negotiation can only occur, resulting in a contract, in the interval between the two. Buyer and seller make a decision through a negotiation based on the seller’s estimate of the cost of performance and the buyer’s estimate of what price the market, established by other potential sellers, would bear -- both estimates being a function of history.

According to the economic calculation problem described by the economist Ludwig Von Mises, a freely agreed upon price that reflects the combination of the buyer’s and seller’s needs or desires is based on a calculation of the type that cannot be performed in a condition of central economic planning by a government. Under central economic planning, or socialism, price determination is not a function of trading history, or of the sellers' willingness to sell or the buyers' willingness to buy at a given price, rather it is either an arbitrary or politically-influenced decision. Such central economic planning, Von Mises observes, replaces economic calculation – the statistical aggregate of all individual actions by buyers and sellers who freely set prices by their own transaction pricing calculations.

Under the free market modeled in the theory of Von Mises, contract pricing relies on the absence of such market intervention so that buyer and seller are totally free to set a price that allows a contract to occur in the interval between the seller's and buyer's respective walkaway prices. This decision of both parties to agree on a price in that interval is one component of economic calculation – a component that applies to a single trade or transaction and contributes to the statistical aggregate which, in turn, tends to govern resource allocation so as to bring supply and demand into alignment.

To a lesser extent, contract pricing described by Garrett in Chapter 8 relies largely on the absence of central economic planning. Why? Because when the state intervenes it either substitutes its decision for that of the buyer and seller, or at a minimum imposes price controls that either foster shortages or surpluses or else tend to preclude the contract from ever happening if the controlled price is below the seller’s cost estimate.

Under contract pricing as described by Garrett, the parties to the contract are still able to perform calculations of reservation (walkaway) prices and determine whether they can do the deal at some price in the interval that does not cause either to walk away. However, in a market that is only partially free, interventions such as regulations, taxes, currency exchange fluctuations, or monetary inflation that increase the seller’s cost do alter the pricing calculation and tend to narrow the interval within which the buyer and seller can come to agreement. That still-intact possibility of agreeing on a price sensitive to market conditions is the essence of the relationship between the economic theory of Von Mises and the contract pricing theory of Garrett.

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in