Profit Maximization/Marginal Costs and Benefits

Graw Mc.Swill, a well-known book publisher, has just bought the rights to publish Billy Blood's latest book "The Microeconomics Massacre." Analysts have estimated the demand for this book to be X = 50,000 - 2,000P, where P stands for per-unit price, and X stands for number of books. Graw Mc.Swill?s cost function to produce the books is TC = 50,000 + 2X, where X is the number of books. This cost function does not include any royalty of compensation to Billy. Also, assume Billy?s costs are zero, for simplicity. Answer the following concisely using graphs, analytics, and intuition. a. Suppose Graw Mc.Swill offers Billy a royalty equal to 50% of the dollar value of the revenue. Accounting fo... click for more

Perfect Competition and Surpluses

Assume that the market for labor is perfectly competitive, and that authorities institute the following policy: All workers should have health insurance, and the employer should pay for 100% of each worker's insurance policy (assume that the cost of the policy is the same for every worker). Use graphical and intuitive analysis to evaluate the effects of this policy on the surpluses of both workers and employers. Do workers really benefit from this policy? If so, under what conditions? Explain.

Indifference curve and budget equation

The task is to use indifference curves and budget constraints to determine which of these two programs to chose. You are to assume that income is equal to $400 per month to spend on long-distance phone service and all other good (D) and that the utility function is U=mD. For each program, calculate the values of m and D that maximize utility. Determine and explain, for each program, whether or not she chooses to purchase additional minutes at the stated price. It?s important that you label the intercept points for budget constraints and insert the proper indifference curves and the utility levels and relevant MRS associated with each curve. D is on the Y-axis and m is on the x-axis. Prog... click for more

Elasticity

The demand for Penn's oil motor oil can be characterized by the following point elasticities: price elasticity=-2.5,cross-price elasticity with Value Lean motor oil = 1.5,and income elasticity=0.75. Indicate whether statement is true or false and explain your answer. A 0.9%price reduction for Penn's Oil would be necessary to overcome the effects of a 3% decline in income.

elasticity

The demand for Penn's Oil motor oil can be characterized by the following point elasticities: price elasticity= -2.5,cross-price elasticity w/Value Lean motor oil=1.5,income elasticity= 0.75.Indicate if statement is true or false and explain your answer. THE CROSS-PRICE ELASTICITY INDICATES THAT A 2% INCREASE IN THE PRICE OF VALUE LEAN WILL CAUSE A 3% INCREASE IN PENN'S OIL DEMAND.