ASSIGNMENT 1
ARCHIT SACHDEVA
230143613
ECO 350 – A1
Problem 1
A.
NB(Q) = B(Q) - C(Q)
NB(Q) = 100 + 36Q - 4Q^2 - 80 -12Q
NB(Q) = 20 + 24Q - 4Q^2
B.
NB(1)= 20 + 24(1) -4(1)^2 = 40
NB(5) = 20 + 24(5) -4(5)^2 = 40
C.
MNB(Q) = DIFFERENTIATION OF 20 + 24Q - 4Q^2 = 24 - 8Q
D.
MNB(1) = 24 - 8(1) = 16
MNB(5) = 24 -8(5) = -16
E.
MNB(Q) = 0 = 24 - 8Q
8Q = 24
Q= 3
F.
MNB(3) = 24 - 8(3) = 0
PROBLEM 2
PREFERRED STOCK VALUE = $125/0.05 = $2500
PROBLEM 3
A.
Accounting cost = $ 145000
Implicit cost = $ 75000
Opportunity cost = $ $220000
B.
Revenue needed for positive accounting profit = $145000
Revenue needed for positive economic profit = $220000
PROBLEM 4
A.
SUPPLY WILL INCREASE
B
SUPPLY WILL DECREASE
C
SUPPLY WILL DECREASE
D
SUPPLY WILL INCREASE
PROBLEM 5
A.
Good Y is a complement of X, where as good Z is a substitute of X.
B.
X is a normal good
C.
Qxd = 6000 - 0.5(5230) - 6500 + 9(100) + 0.1(70000) = 4785
PROBLEM 6
A.
Qd = Qs
60 - P = P - 20
2P = 80
P = $40
Qd = 60 - 40 = 20
Qs = 40 - 20 = 20
B.
Qd = 60 - 50 = 10
Qs = 50 - 20 = 30
Surplus = 30 - 10 = 20
C.
Qd = 60 - 32 = 28
Qs = 32 - 20 = 12
Surplus = 28 - 12 = 16
PROBLEM 7
A.
Number of units supplied at price floor of $ 40 = 40 - 16 = 24
Number of units demanded at price floor of $ 40 = 92 - 2(40) = 12
Unsold units of firm = 24 - 12 = 12
Cost to government of buying unsold units of firm = 40 * 12 = $456
B.
92- 2PX = PX - 16
3PX = 92 + 16
PX = 108/3
PX = $36
92 - 2(36) = 92 - 72 = 20
Lost social welfare (Deadweight loss) = 0.5 * ( 40 -36 ) * ( 20 - 12 ) = 0.5 * 4 * 8 = $16
PROBLEM 8
A.
QXD = 1200 - 3PX - 0.1PZ
QX = 750 UNITS
ELASTICITY =. -3 *. (140/750) = - 0.56
INELASTIC
B.
QXD = 450
ELASTCITY = -3 * (240/450) = -1.6
ELASTIC
C.
ELASTICITY = -0.1 * ( 300/750 ) = -0.04
PROBLEM 9
A.
-3 * 0.05 = -0.15
B.
-4 * 0.08 = -0.32
C.
-2 * 0.04 = -0.08
D.
1 * 0.04 =. 0.04