Exercise 1: Suppose that as a result of an improvement in technology the producer's supply change from: (S1) Qs=-40+20P to (S2) Qs=-10+20P

1. From S1 to S2, Supply increase or decrease? Why? 2. Derive this producer's old and new supply schedule? 3. On one axes, draw this producer's supply curves before and after the improvement in technology? 4. How much of commodity X does this producer supply at the price of 4$ before and after the improvement in technology? Exercise 2: Tablele 2.1 gives the supply schedule of the three producer of commodity X in the market. Draw, on one set of axes, the three producer's supply curves and derice geometrically the market supply curve for commodity X P ($/Kg) Quantity Supplied (Kg, Per time period) Producer 1 Producer 2 Producer 3 Market Supply 0.00 0.00 0.00 10.00 10.00 1.00 0.00 0.00 25.00 25.00 2.00 0.00 20.00 35.00 55.00 3.00 10.00 30.00 42.00 82.00 4.00 16.00 36.00 46.00 98.00 5.00 20.00 40.00 50.00 110.00 6.00 22.00 42.00 53.00 117.00 Exercise 3: There are 10,000 identical individual in the market for commodity X, each with a demand function given by (D1) Qd=12-2P, and 1,000 identical producers of commodity X, each with a function given by (S1) Qs=20P. 1. Find the market demand function and the market supply function for commodity X? 2. Find the market demand schedule and the market supply schedule of commodity X and from them find the equilibrium price and the equilibrium quantity? 3. Plot, on one set of axes, the market demand curve and the market supply curve for commodity X and show the equilibrium point? 4. Obtain the equilibrium price and the equilibrium quantity mathematically? Exercise 4: Suppose that from the condition of equilibrium in exercise 3, there is an increase in consumer's income (ceteris paribus) so that a new market demand curve is given by (D2) Qd=140,000-20,000P

1. Derive the new market demand schedule 2. Show the new market demand curve on the graph of exercise 3 (3) 3.State the new equilibrium price and the new equilibrium quantity for commodity X. 4. Obtain the equilibrium price and the equilibrium quantity mathematically? Exercise 5: Commodity X have: (D1) Q=100-2P (S1) Q=3P-50 1. Find the equilibrium price Pe1and the equilibrium quantity Qe1? Pe1= Qe1= 2 Demand increase 50% become (D2), so demand D2 have: (D2) Q= Find the equilibrium price Pe2 and the equilibrium quantity Qe2 between D2 and S1? Pe2= Qe2= 3 Supply increase 40% become (S2), so supply S2 have: (S2) Q= Find the equilibrium price Pe3 and the equilibrium quantity Qe3 between D2 and S2? Pe3= Qe3= 4. Derive the demand schedule and supply schedule Q Pd1 Ps1 Pd2 Ps2 0.00 50.00 16.67 50.00 16.67 5.00 47.50 18.33 48.33 17.86 .. .. .. .. .. . . . . . 75.00 12.50 41.67 25.00 34.52 80.00 10.00 43.33 23.33 35.71 5. Plot, on one set of axes, the demand curve (D1, D2) and the supply curve (S1, S2) for commodity X and show the equilibrium point (E1, E2, and E3)? Exercise 6: Commodity X have: (D1) P=100-(1/4)Q (S1) P=(3/4)Q-50 1. Find the equilibrium price, Pe1and the equilibrium quantity, Qe1? 2 Demand increase 50% become (D2), so demand D2 have: (D2) Q=??? Find the equilibrium price Pe2 and the equilibrium quantity Qe2 between D2 and S1? 3 Supply increase 40% become (S2), so supply S2 have:

(S2) Q=??? Find the equilibrium price Pe3 and the equilibrium quantity Qe3 between D2 and S2? 4. Derive the demand schedule and supply schedule 5. Plot, on one set of axes, the demand curve (D1, D2) and the supply curve (S1, S2) for commodity X and show the equilibrium point (E1, E2, and E3)? Exercise 7: There are 10,000 identical individual in the market for commodity X, each with a demand function given by (D1) P=120-Q, and 1,000 identical producers of commodity X, each with a function given by (S1) P=(1/2)Q 1. Find the market demand function and the market supply function for commodity X? 2. Find the market demand schedule and the market supply schedule of commodity X and from them find the equilibrium price and the equilibrium quantity? 3. Plot, on one set of axes, the market demand curve and the market supply curve for commodity X and show the equilibrium point? 4. Obtain the equilibrium price and the equilibrium quantity mathematically?

Exercise 1: The following table presents hypothetical data for the market demand for a good. Complete the table: Qd P AR TR MR 1.00 50.00 2.00 40.00 3.00 30.00 4.00 20.00 5.00 13.00 6.00 8.00

Ed

Exercise 2: Given: The demand equation is P=40-2Q a. What is the equation for MR? b. At what output is MR=0? c. At what output is TR maximum? d. Determine the price elasticity of demand at the output where TR is maximum Complete the table: Q P TR MR Ed Type of Demand 0.00 0.50 1.00 20.00 Draw, on one set of axes the P, TR, MR Exercise 3: Suppose that the demand equation for a good is Q=20-2P Complete the table: Q P TR MR Ed Type of Demand 0.00 2.00 4.00 20.00 Exercise 4: Suppose that the demand equation for a good is Q=16+9P-2P2, calculate the price elasticity of demand at a price of $4 and at a price $3 Exercise 5: If the demand equation for an item is P=1000+3Q-4Q2 a. Determine price elasticity of demand at Q=10

b. Determine the equation for TR and MR Exercise 6: Given: The relationship between product A and product B is Qa=80Pb-0.5Pb2, where Qa=Units of product A demanded by consumers each day and Pb=Selling price of product B. a. Determine the cross-elasticity coefficient for the two products when the price of product B=$10 b. Are products A and B complements, subtitutes, or independent, and how "strong" is the relationship? Exercise 7: The Fairfax Apparel Company manufactures sports, shirts for men; during 1987 Fairfax sold an average of 23,000 sports shirts for $13 per shirt. In early January 1988, Fairfax's major competitor, Lafayyete Manufacturing Co., cut the price of its sports shirts from $15 to $12. The orders Fairfax received for its own sports shirts dropped sharly, from 23,000 per month to 13,000 per month for February and March 1988. a. Calculate the cross elasticity of demand between Fairfax's sports shirts and Lafayette's sports shirts during February and March. Are the two companies' sports shirts good or poor substitutes? b. Suppose that the coeffient of the price elasticity of demand for Fairfax's sports shirts is -2.0. Assuming that Lafayette keeps its price at $12, by how much must Fairfax cut its price to build its sales of shirts back up to 23,000 per month? (Use the arc formula for price elasticity) Exercise 8: Find the price elasticity of demand (Ed) for the curvilinear demand function of the form Q=aP-b

Exercise 9: Suppose that two prices and their corresponding quantities (Table 9) are observed in the market for commodity X. Find the price elasticity of demand for commodity X between point A and point B (Moving from A to B, from B to A, and Midway between A and B) Point Px Qx A 6.10 32,180.00 B 5.70 41,230.00 Exercise 10: Find the cross elasticity of demand between hot dogs (X) and hamburgers (Y) (Exy) and between hot dogs (X) and mustard (Z) (Exz) for the data in Table 10

Commodity Hamburgers (Y) Hot dogs (X) Mustard (Z) Hot dogs (X) P 3.00 1.00 1.50 1.00

Before Q 30.00 15.00 10.00 15.00 P 2.00 1.00 2.00 1.00

After Q 40.00 10.00 9.00 12.00

Exercise 11: From the supply schedule in Table 11, find arc elasticity for a movement a. From poit A to point C b. From poit C to point A c. Midway between A and C d. At point B Point A B C D Px 6.00 5.00 4.00 3.00 Qx 6,000.00 5,500.00 4,500.00 3,000.00

E 2.00 0.00

Exercise 12: With reference to Fig 12, consider the following two farm-aid programs for wheat farmers. I. The government sets the price of wheat at P2 and purchases the resulting surplus of wheat at P2. II. The government allows wheat to be sold at the equilibrium price of P1 and grants each farmer a cash subsidy of P2-P1 on each unit sold. Which of the two programs is more expensive to the government?
Pw P2 P1 A E Dw Sw

Qw

Exercise 13: We have: %Q= %TR= Find: %P= Ed= Exercise 14: We have:

%P= %TR= Find: %Q= Ed= Exercise 15: We have: %Q= %P= Find: %TR= Ed= Exercise 15: We have: %Q= Ed= Find: %P= %TR= Exercise 16: At the equilibrium point we have: Pe= 100.00 Qe= 200.00 Es= 4.00 Ed= -2.00 Find: Demand function and Supply function:

Q=a+bP and P=c+dQ

Exercise 17:

A B C

Compare type of demand at poits A, B, and C

Exercise 18:
A B C

Compare type of demand at poits A, B, and C

Exercise 19:
A B C

Compare type of demand at poits A, B, and C

Type of Demand

Exercise 1: Demand and Supply for commodity X: (D1) Q=500-2P (S1) Q=3P-200 1. Find the equilibrium price and quantity (Pe1, Qe1) for commodity X, elasticity of demand and supply at equilibrium point (Ed1, Es1)? 2. Demand for commodity X increase 50% in order to become D2, (D2) Q=??? Find the equilibrium price and quantity (Pe2, Qe2) between D2 and S1 3. Supply for commodity X increase 40% in order to become S2, (S2) Q=??? Find the equilibrium price and quantity (Pe3, Qe3) between D2 and S2 4. From D2 and S2, the government set the price control (Pct) 4.1 Price control=120%*Pe3 Pct=??? What is type of price? Result of that price: Qd=??? Qs=??? Excess demand or excess supply? Government spending (B) ??? B=??? 4.2 Price control=80%*Pe3 Pct=??? What is type of price? Result of that price? Qd=??? Qs=??? Excess demand or excess supply? Government spending ??? B=??? 4.3 Tax (T)=10%Pe3 T=??? 4.3.1 If taxe on the demand side (buyers) * Demand function and supply function after tax * Equilibrium price and quantity after tax (Pe4, Qe4) * Incidence of tax between buyers and selllers * Total government tax revenue is? 4.3.2 If taxe on the supply side (sellers) * Demand function and supply function after tax * Equilibrium price and quantity after tax (Pe5, Qe5) * Incidence of tax between buyers and selllers * Total government tax revenue is?

Exercise 2: Demand and Supply for commodity X: (D1) P=500-(1/3)Q (S1) P=(3/4)Q-200 1. Find the equilibrium price and quantity (Pe1, Qe1) for commodity X, elasticity of demand and supply at equilibrium point (Ed1, Es1)? 2. Demand for commodity X increase 50% in order to become D2, (D2) P=??? Find the equilibrium price and quantity (Pe2, Qe2) between D2 and S1 3. Supply for commodity X increase 40% in order to become S2, (S2) P=??? Find the equilibrium price and quantity (Pe3, Qe3) between D2 and S2 4. From D2 and S2, the government set the price control (Pct) 4.1 Price control=120%*Pe3 Pct=??? What is type of price? Result of that price: Qd=??? Qs=??? Excess demand or excess supply? Government spending (B) ??? B=??? 4.2 Price control=80%*Pe3 Pct=??? What is type of price? Result of that price? Qd=??? Qs=??? Excess demand or excess supply? Government spending ??? B=??? 4.3 Tax (T)=10%Pe3 T=??? 4.3.1 If taxe on the demand side (buyers) * Demand function and supply function after tax * Equilibrium price and quantity after tax (Pe4, Qe4) * Incidence of tax between buyers and selllers * Total government tax revenue is? 4.3.2 If taxe on the supply side (sellers) * Demand function and supply function after tax * Equilibrium price and quantity after tax (Pe5, Qe5) * Incidence of tax between buyers and selllers * Total government tax revenue is? Ecersice 3:

The price of commodity X before tax is 10$/Kg, Tax on supply side (sellers) 3$/Kg; Ed of commodity X=-4, Es of commodity X=2. The price of commodity X after tax? Ecersice 4: The price of commodity X before tax is 10$/Kg, the price of commodity X after tax is 12 $/Kg. Ed of commodity X=-4, Es of commodity X=2. How much tax per unit of output?

Exercise 1: Complete the following table: Units of Output TFC TVC 0.00 100.00 200.00 300.00 400.00 500.00

TC 500.00 750.00 1,100.00 1,500.00 2,000.00 2,600.00

AFC

AVC

ATC

Exercise 2: Complete the following table. Assume that units of fixed input cost $10 each and that units of variable inputs cost $20 each. Marginal Average Units of Units of Units of Product of Product of Fixed Variable Variable Variable Variable Input Input Output Input Input TFC TVC 100.00 0.00 0.00 100.00 20.00 600.00 100.00 40.00 1,500.00 100.00 60.00 2,000.00 100.00 80.00 2,200.00 100.00 100.00 2,300.00 Exercise 3: Given the total cost function TC=10000+9Q, where Q=units of output: a. Determine the equations for TFC and TVC, and illustrate graphically the relationships among TFC, TVC, TC. b.Determine the equation for AFC, AVC, ATC, and MC. Graphically illustrate their relationships to one another. Exercise 4: Given the total cost function TC=20000+4Q+0.5Q^2, where Q=units of output: a. Determine the equations for TFC and TVC. Graph the TFC, TVC, and TC functions, and graphically show their relationships to one another. How would you describe the behavior of TVC as output increases? b. Determine the equations for AFC, AVC, ATC, and MC. Graph each of these functions, and graphically show their relationships to one another. Exercise 5: Given the following information: * Q=6X, where X=units of variable input and Q=units of output. * There are 10 units of fixed input. * Price of the fixed inputs = $10/unit. * Price of the variable inputs = $5/unit. Determine the corresponding equations for TFC, TVC, TC, AFC, AVC, ATC, and MC.

Exercise 6: The total cost function of a shirt manufacturer is TC=10+26Q-5Q^2+0.5Q^3, where TC is in hundreds of dollars per month and Q is output in hundreds of shirts per month. a. What is the equation for TVC? b. What is the equation for AVC? c. What is the equation for ATC? d. What is the equation for MC? e. Plot the relationships among TFC, TVC, and TC f. Plot the relationships among AFC, AVC, AC, and MC Exercise 7: Given TC=2000+15Q-6Q^2+Q^3, where Q= units of output: Complete the following table. Q TFC TVC TC AFC 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00 24.00 26.00 28.00 30.00 32.00 34.00 36.00 38.00 40.00

AVC

ATC

Exercise 8: Given the following cost information: AFC for 5 units of output is $2000 AVC for 4 units of output is $850 TC rises by $1240 when the sixth unit of output is produced ATC for 5 units of output is $2880 It costs $1000 more to produce 1 unit of output than to produce nothing. TC for 8 units of output is $19040 TVC increases by $1535 when the seventh unit of output is produced.

AFC plus AVC for 3 units of output is $4185 ATC falls by $5100 when out rise from 1 to 2 units. Using this information, complete the following table: Output TFC TVC TC AFC 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 Exercise 9: 9.1 Use the production function: Q=10K^(0.5)*L^(0.6) K 6.00 5.00 4.00 3.00 2.00 1.00 1.00 2.00

AVC

ATC

3.00

4.00

5.00

6.00

a. Complete the production table. b. For this production system, are returns to scale decreasing, constant, or increasing? Explain. c. Suppose the wage rate is $28, the price of capital also is $28 per unit, and the firm currently is producing 30.31 units of output per period using four units of capital and two units of labor. Is this an efficient resource combination? Explain. What would be a more efficient combination? 9.2 Use the data from 9.1 to answer the following questions. a. If the rate of capital input is fixed at three and if output sells for $5 per unit, determine the total average, and marginal product functions and the marginal revenue product function for labor in the following table. L 0.00 1.00 2.00 3.00 4.00 5.00 6.00 TPL APL MPL MRPL

b. Using data from part a, if the wage rate is $ 28 per unit, how much labor should be employed? c. If the rate of labor input is fixed at 5 and the price of output is $5 per unit, determine the total, average, and marginal product functions for capital and the marginal revenue product of capital in the following table K 0.00 1.00 2.00 3.00 4.00 5.00 6.00 TPK APK MPK MRPK

d. Using the data from part c, if the price of capital is $40 per unit, how many units of capital should be employed? Exercise 10: International Publishing has kept the following data on labor input and production of textbook for each of eight production periods. Production period 1 2 3 4 5 Labor Input 4 3 6 8 2 Output of Books 260 190 900 800 110

a. Use the data on labor input and total product to compute the average and marginal product for labor input rate from to eight. (Assume that a zero labor input would resuld in zero output) L 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 QL APL MPL

b. Draw, on one set of axes the QL, APL, MPL Exercise 11: The following table shows the relationship between hours of study and final examination grades in each of three classes for a particular student, who has a total of 15 hours to prepare for these tests. If the objective is to maximize the average grade in the three classes, how many

hours should this student allocate to preparation for each of these classes? Explain your approach to this problem. Economics Mathematics Management Hours Grade Hours Grade Hours Grade 0.00 40.00 0.00 50.00 0.00 30.00 1.00 50.00 1.00 60.00 1.00 50.00 2.00 59.00 2.00 69.00 2.00 60.00 3.00 67.00 3.00 77.00 3.00 66.00 4.00 74.00 4.00 84.00 4.00 71.00 5.00 79.00 5.00 90.00 5.00 74.00 6.00 83.00 6.00 95.00 6.00 76.00 7.00 86.00 7.00 96.00 7.00 77.00 8.00 88.00 8.00 97.00 8.00 77.00 9.00 89.00 9.00 97.00 9.00 77.00 10.00 89.00 10.00 97.00 10.00 77.00 Exercise 12: Given the total cost function:

TC=1000+10Q-0.9Q^2+0.04Q^3
find the rate of output that results in minimum average variable cost. Exercise 13: MicroApplications Inc. is a small firm that specializes in the production and mail-order distribution of computer programs for microcomputers. The acounting deparment has gathered the following data on development and production costs for a typical program and the documenttation that must accompany the program. Development cost (fixed): Program development 10,000.00 Manual preparation and typesetting 3,000.00 Advertising 10,000.00 Total 23,000.00 Variable costs per unit: Blank disk 2.00 Loading cost 0.50 Postage and handling 1.25 Printing of the manual 2.75 Total 6.50 A typical program of this type, including the manual, sells for $40. Base on this information: a. Determine the break even munber of programs and the total revenue associate with this volume. b. MicroApplications has a minimum profit target of $40000 on each new program it develops. Determine the unit and dollar volume of sales required to meet this goal. c. While this program is still in the development stage, market prices for software fall by 25 percent due to a significant increase in the number of programs being supplied to the market. Determine the new break even unit and dollar volumes.

Exercise 14: A firm is considering the rental of a new copying machine. The rental terms of each of the three machines under consideration are given here: Costs Monthly Per Fee Copy Machine ($) ($) A 1,000.00 0.03 B 300.00 0.04 C 100.00 0.05 How many copies per month would the firm have to make for B to be a lower total cost machine than C? For A to be lower cost than B? Exercise 15: Suppose that the total cost equation (TC) for a monopolist is given by TC=500+20Q^2 Let the demand equation be given by P=400-20Q What are the profit-maximizing price and quantity? What are the Revenue-maximizing price and quantity? Complete the following table. Q TC TR MC MR Profit 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 Exercise 16: A firm sells in two markets and has constant marginal cost of production equal to $2 per unit, FC=5. The demand equations for the two markets are as follows: Market 1: Market 2: P1=14-2Q1 P2=10-Q2 Use third-degree price discrimination, what are the profit-maximizing price and quantities

in each market? Show that greater profits result from price discrimination than would be obtained if a uniform price were used. Exercise 17: An automobile manufacturer estimates that total variable costs will be $500 million and total fixed costs will be $1 billion in the next year. In setting prices, it is assumed that sales will be 80% of the firm's 125000 vehicle per year capacity, or 100000 units. The target rate of return is 10 percent, which is to be earned on an investment of $2 billion. If prices are set on a cost-plus basic, what price should be charged for each automobile? Exercise 18: Smith Distributing sells video cassettes in two separable markets. The marginal cost of each cassettes is $2, FC=10. For the first market, demand is given by: Q1=20-5P1, The demand equation for the second market is: Q2=20-2P2 a. If the firm uses third degree price dismination, what will be the profit maximizing price and quantity in each market? How much economic profit will the firm earn? b. If the firm charges the same price in both markets, what will be the profit maximizing price and total quantity? How much economic profit will the firm earn? Exercise 19: Global motors sells its automobies in both the United States and Japan. Due to trade restriction, a vehicle sold in one country cannot be resold in the other. The demand functions for the two countries are US P=30000-0.4Q Japan P=20000-0.2Q The firm's total cost function is TC=10,000,000+12,000Q. What price should Global charge in each country in order to maximize profit? What will be the total profit? Exercise 20: A firm produces two types of calculators, x and y. The revenue and cost equations are shown below with Qx and Qy measured in thousands of calculators per year. Total revenue=2Qx+3Qy Total cost=Qx^2-2Qx*Qy-2Qy^2+6Qx+14Qy+15*10^6 a. To maximize profit, how many of each type of calculator should the firm produce? b. What is the maximum profit the firm can earn?

MC

TC

AFC

ATC

MC

hips among TFC, TVC, TC. relationships to one another.

ns, and graphically show their increases? ions, and graphically show

TC is in hundreds of

MC

MC

currently is

employed? ne the total,

6 7 1500

7 5 2100

8 1 50

product for labor input rate from one

der distribution e following ion that must

h this volume.

l by 25 percent Determine

of the three

ost machine

The demand

Exercise 1: Suppose that as a result of an improvement in technology the producer's supply change from: (S1) Qs=-40+20P to (S2) Qs=-10+20P 1. From S1 to S2, Supply increase or decrease? Why? 2. Derive this producer's old and new supply schedule? 3. On one axes, draw this producer's supply curves before and after the improvement in technology? 4. How much of commodity X does this producer supply at the price of 4$ before and after the improvement in technology? S1
P 0 1 2 3 4 5 6 7 8 9 10 11 Q -40 -20 0 20 40 60 80 100 120 140 160 180 P 0 1 2 3 4 5 6 7 8 9 10 11

S2
Q -10 10 30 50 70 90 110 130 150 170 190 210

Exercise 2: Tablele 2.1 gives the supply schedule of the three producer of commodity X in the market. Draw, on one set of axes, the three producer's supply curves and derice geometrically the market supply curve for commodity X P ($/Kg) Quantity Supplied (Kg, Per time period) Producer 1 Producer 2 Producer 3 0.00 0.00 0.00 10.00 1.00 0.00 0.00 25.00 2.00 0.00 20.00 35.00 3.00 10.00 30.00 42.00 4.00 16.00 36.00 46.00 5.00 20.00 40.00 50.00 6.00 22.00 42.00 53.00

upply at technology?

240 200 160 120 80 40 0 0 -40 -80 1 2 3 4 5 6 7 8 9 10 11 12 S1 S2

So Supply increase

oducer of

etrically
140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 0.00 -20.00 20.00 Producer 1 Producer 2 Producer 3 Market Supply

r time period) Market Supply 10.00 25.00 55.00 82.00 98.00 110.00 117.00

Producer 1 Producer 2 Producer 3 Market Supply