Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(a) Calculate the average xed cost of producing 2 units. Show your work. (b) Identify the prot-maximizing quantity. Explain using marginal analysis. (c) Calculate the

image text in transcribed
(a) Calculate the average xed cost of producing 2 units. Show your work. (b) Identify the prot-maximizing quantity. Explain using marginal analysis. (c) Calculate the economic prot at the prot-maximizing quantity you identied in part (b). Show your work. (d) Based on your answer to part (c), will the number of rms in the industry increase, decrease, or stay the same in the long run? Explain. (e) Based on your answer to part (c), will the market price increase, decrease, or stay the same in the long run? Explain. (f) The income elasticity of demand for Good H is 'l .3, and the cross-price elasticity of demand for desk lamps with respect to the price of Good H is -@ . 9. Based on your answer to part (e), what will happen to the demand for desk lamps? Explain. (g) Now assume that the market in which Sophia's Lighting Store operates is in long-run equilibrium at a price of $130 per unit. (i) Suppose the government imposes a price oor at $150 per unit on the market for Good H. Will consumer surplus in the market for Good H increase, decrease, or stay the same in the short run as a result of the price oor? Explain. (ii) Suppose instead the cost of energy, a variable cost for Sophia's Lighting Store, increases. Will the prot-maximizing quantity of Good H for Sophia's Lighting Store increase, decrease, or stay the same in the short run? Explain

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Human Resources In The Urban Economy

Authors: Mark Perlman

1st Edition

1317332474, 9781317332473

More Books

Students also viewed these Economics questions

Question

4. What is the goal of the others in the network?

Answered: 1 week ago

Question

2. What we can learn from the past

Answered: 1 week ago