PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 3, Problem 3RQ
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Check whether the imposition of gasoline price control to protect the poor from rising gasoline price.
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Suppose demand and supply are given by: (LO3, LO4)Qx d = 14 − 1/2 Px and Qx s = 1/4Px − 1a. Determine the equilibrium price and quantity. Show the equilibrium graphically.
d. In general, what happens to the level of consumer sur
6. Suppose demand and supply are given by Qd = 60 - P and Qs =P - 20. (LO3, L04)
a. What are the equilibrium quantity and price in this market?
b. Determine the quantity demanded, the quantity supplied, and the magnitude of the
surplus if a price floor of $50 is imposed in this market.
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shortage if a price ceiling of $32 is imposed in this market. Also, determine the full
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102 101
Suppose demand and supply are given by: (LO3, LO4)
Qx d = 14 − 1/2 Px and Qx s = 1/4Px − 1
a. Determine the equilibrium price and quantity. Show the equilibrium graphically.
B. Supposed a $ 12 excise tax is imposed on the good. Determine the new equilibrium price and quantity
C. How much tax revenue does the government earn with the $12 tax
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PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- 7. Suppose demand and supply are given by: (LO3, L04) Q = 14 - P₁ and Q = P₁ - 1 Р X a. Determine the equilibrium price and quantity. Show the equilibrium graphically. b. Suppose a $12 excise tax is imposed on the good. Determine the new equilibrium price and quantity. How much tax revenue does the government earn with the $12 tax?arrow_forwardYou own Earthworm Excavators. Your company is the sole manufacturer of super-sized excavators that are used in the world’s largest mining operations. The U.S. has recently lifted export restrictions on the product you sell, so you can now sell your equipment in the world market along with sales in the domestic market. You hire an economist to estimate the following (inverse) demand curves per year for these distinct markets: Domestic market : Pd = $1200 - $10QdForeign market : Pf = $600 - $5Qf where P refers to prices charged in each market in thousands of dollars and Q refers to the annual quantities demanded in each market. The total costs (in thousands of dollars) of your annual operation are given by: TC = 900 + 200Q a. If you decide to offer you machines at a single price to all potential buyers, at what price will the foreign buyers be priced out of the market?b. What is the market demand function if you decide to offer the machines to all potential buyers at a single…arrow_forwardEarlier this year, 2021, the price of chicken meat rose unexpectedly reached to 250/ kilo at peak from the previous price of 170/ kilo. This 68% increase of price per kilo was primarily caused by excess demand for chicken meat. This is the result of the decrease in consumption for pork meat due to the threat of African Swine Flu (ASF). However, even though consumer shifted preferences, the increase in the price of chicken was perceived to be too high for the budget of consumers. Therefore, sellers realized decrease in their daily aggregate sales from 1,000 kilos to 700 kilos. 1. Illustrate the change in the market equilibrium through a graph. 2. What presumably happened to the total revenues of the sellers during the price hike period? a.) Compute the price elasticity of demand b.) Derive the total revenue before the hike (TR1), and after the hike (TR2).arrow_forward
- Earlier this year, 2021, the price of chicken meat rose unexpectedly reached to 250/ kilo at peak from the previous price of 170/ kilo. This 68% increase of price per kilo was primarily caused by excess demand for chicken meat. This is the result of the decrease in consumption for pork meat due to the threat of African Swine Flu (ASF). However, even though consumer shifted preferences, the increase in the price of chicken was perceived to be too high for the budget of consumers. Therefore, sellers realized decrease in their daily aggregate sales from 1,000 kilos to 700 kilos. Illustrate the change in the market equilibrium through a graph. What presumably happened to the total revenues of the sellers during the = price hike period? Compute the price elasticity of demand. Derive the total revenue before the hike (TR1), and after the hike (TR2).arrow_forwardRecently, the spot market price of U.S. hot rolled steel plummeted to $400 per ton. Just one year ago, this same ton of steel cost $700. According to Metals Monitor, the drop in price was due to falling oil prices, along with a rise in cheap imports and excess capacity. These dramatic market changes have greatly impacted the supply of raw steel. Suppose that last year the supply for raw steel was QS, raw = 600 +4P, but this year it has shifted to QS raw- = 4,200 +4P. Assuming the market for raw steel is competitive and that the current worldwide demand for steel is Qara raw 9,000 -8P, compute the equilibrium price and quantity for the steel market one year ago, and the equilibrium price-quantity combination for the current steel market. Instructions: Enter your responses as whole numbers. Price one year ago: $ Quantity one year ago: Price for current market: $ Quantity for current market: Suppose the cost function of a representative steel producer is C(Q) = 1,200 + -15Q². How much raw…arrow_forwardRecently, the spot market price of U.S. hot rolled steel plummeted to $400 per ton. Just one year ago, this same ton of steel cost $700. According to Metals Monitor, the drop in price was due to falling oil prices, along with a rise in cheap imports and excess capacity. These dramatic market changes have greatly impacted the supply of raw steel. Suppose that last year the supply for raw steel was QSraw = 600 + 4P, but this year it has shifted to QSraw= 4,200 + 4P. Assuming the market for raw steel is competitive and that the current worldwide demand for steel isQdraw = 9,000 – 8P, compute the equilibrium price and quantity for the steel market one year ago, and the equilibrium price–quantity combination for the current steel mar ket. Suppose the cost function of a representative steel producer is C(Q) = 1,200 + 15Q2. Compare the change in the quantity of raw steel exchanged at the market level with the change in raw steel produced by a representative firm. How do you explain this…arrow_forward
- Last year, 1000 gallons of almond milk (a non-dairy product) were sold at a price of $10. Yet, this year, a bad harvest in California has wiped out a significant part of the almond harvest. At the same time, a larger number of people are looking to shift away from dairy products towards non- dairy alternatives. Because of these two changes, the equilibrium price will increase and change in the equilibrium quantity is unambiguous. the equilibrium price will decrease but change in the equilibrium quantity is ambiguous. the change in the equilibrium price is ambiguous, but the equilibrium quantity will increase. O the equilibrium price will increase but change in the equilibrium quantity is ambiguous.arrow_forwardAn economist estimates that a market has a demand curve of the form P = 37- (1.23) Q and a supply curve of the form P = 1 + (0.984) Q. (See the curves graphed in the figure below.) Accordingly, she estimates that the quantity equilibrium (Qe) in this market will be 16.26 (or 16.260163) and that the equilibrium price (Pe) in the market will be. (Answer may be rounded to nearest hundredth.) Supply X Demand Q OA. $20.84 O B. $12.20 O C. $23.00 O D. $17arrow_forwardFor the first time in two years, Big G (the cereal division of General Mills) raisedcereal prices by 4 percent. If, as a result of this price increase, the volume of all cerealsold by Big G dropped by 5 percent, what can you infer about the own price elasticityof demand for Big G cereal? Can you predict whether revenues on sales of its LuckyCharms brand increased or decreased? Explain. (LO1, LO3)arrow_forward
- 4. The demand for good X is given by Q² = 6,000 − ¹ P₁ − P₁₂ + 9P₂ + + TOM 10arrow_forwardAn economist estimates that a market has a demand curve of the form P = 26 - (0.867) Q and a supply curve of the form P = 0.5 + (1.21) Q. (See the curves graphed in the figure below.) Accordingly, she estimates that the equilibrium price ( P e) in the market will be $15.36 (or $15.355561). This means that the amount of the product bought and sold in the market must be ____.arrow_forwardBetween 1950 and 2020, the price of wheat fell dramatically from $20.23 per bushel to $4.85 per bushel. Suppose between 1950 and 2020, the supply of wheat increased substantially due to increases in productivity, shifting the wheat supply curve to the right. With this supply shift, the amount by which the price of wheat falls will be larger the more the demand for wheat. In addition, assume that between 1950 and 2020 the income of the average American increased substantially and that wheat is a normal good. With this increase in income, OA. the price of wheat will be unaffected. OB. the amount by which the price of wheat rises will be smaller the higher the income elasticity of wheat. C. the amount by which the price of wheat falls will be smaller the higher the income elasticity of wheat. OD. the amount by which the price of wheat rises will be smaller the lower the income elasticity of wheat. OE. the amount by which the price of wheat falls will be larger the higher the income…arrow_forward
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