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{b} 'When does a cost become sunk 1- (o) Using a demand and supply framework , and explaining each step in your logic , address
{b} 'When does a cost become sunk 1-" (o) Using a demand and supply framework , and explaining each step in your logic , address the following . ii] Describe the likely effects of a dmp in the cost of employing skilled craftsmen on the market for fashionable shoes . {iiJHow might an increase in the cost of car insurance affect the US market for new cars '9 {iii} Global warming seems likely to increase migration from the south of the USA to the northern states .It also seems likely to increase the need for insulation in the construction of houses in the northern states. Taking these assertions as given, how would the housing market in North Dakota he affected by global warming 9' {iv} Mayor Bloom berg wants to make all the taxis in New York hybrid cars by 2010 .What effect will this have on the marl-mt for used cars in New York? [5] Buttons and badges As Election Day approaches in the mayoral race , the demand for buttons is hitting unprecedented heights. Three months before Election Day; your friend john , who currently has a small factory producing badges , is considering expanding production. Previously, this very competitive industry was relatively stable and demand and supply were estimated at: Demand : Q=iD2P S upply: Q = 2 P [Quantities are measured in 100,000 '5 of buttons , while prices are in cents .] john estimates that over the past months ,monthly demand has risen to a higher level: Q=I4BEP He estimates demand will remain at this level until the election ,and then fall back down to the old level .John calculates that by buying a new machine for $5,000 he would be able to produce 40,000 more buttons a month at a marginal cost of 30. [Assume that there are no other additional costs of production .} {a} What was the old price of buttons \".3 How many buttons were being produced at this price \".1 [b] What is the new price of buttons \".1 How many buttons are produced at this price '5' [o] Should John buy the machine \".3 In answering this question , notice that ifjohn went ahead and bought the machine his additional production would be tiny in comparison with the overall size of the market and would have negligible effect on price . Also , in no more than a couple of sentences mention any drawbacks in this analysis
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