Explain the questions in the attachment

3. (25 points) Assume a competitive industry for pencils exists and assume that each producer faces an identical long-run total cost C(),) - y/ - 10y/ + 27y if y, >0, C(),)=0 otherwise. (a) (5 points) What will be the long-run price of pencils? (b) (5 points) In the long-run equilibrium, how many pencils each maker will produce per day? (c) (10 points) Assume the market demand for pencil is given by the equation y" = 500-100p . How many pencils will be demanded in the market? How many pencil makers are there? (d) (5 points) Suppose that there is an increase in market demand for pencils to >" =600-100p . In the long-run equilibrium, how many pencil makers will there be? What will be each maker's profit?Consider the market for electric cars where (inverse) demand for electric cars is described by P : 122 Q, vrl'rere Q denotes the number of electric cars demanded (in thousands) and P denotes the price per electric car. Manufacturing electric cars involves a xed cost of 2,000, while the marginal cost of production is 2. (a) Consider a monopolist producer of cars Green Motors. Find the quantity of electric cars produced, the price per electric car and the prot made by Green Motors. [6 marks] {b} Now suppose the car market is duopolistic, where Green Motors and its competitor m engage in Cournot competition. Both rms face the same costs. Describe Coun'rot competition and nd the market outcome in the Cournot equilibrium. Are consumers better off than in {a}? [14 marks] to} Suppose the cost of 2,000 reflects Research and Development (RED) costs to develop an electric car that cannot be recovered. Would your answer to {b} change? [5 marks] {d} The government offers Green Motors and m; a subsidy of 500 each. Does this benet consumers? [5 marks] 1. Using the IS/LM model with unconver interest parity (UIP) to answer the following quations: [suppose that LM curve is positively sloped and future expectation of exchange rate remains constant] [You must draw diagrams.] (a) Suppose that the output of forengin country increases. Show the effect of an increase in on the domestic ocuntry's Y and E under the exible change regime. (25%) (b) Show the effect of an increase in the fopreign interest rateon the domestic country's output Y and exchnage rate E under the exible exchange regime. (25%) (c) Show the effects of an increase in domestic G on the domestic country's output Y and exchange rate under the exiable exchange rate regime. (25%) ((1) Suppose that the deomestic country is under the regime of xed exchange rate. If the output of foreign country Y* increases, what will happen to the domestic country Y and E? (25%) A study conducted by Card and Krueger [1994) compared the employment of fast food restaurant workers in New Jersey and Pennsylvania a few months before and a few months after New Jersey passed a law increasing the minimum wage in that state. This was a "difference-in-differences\" study: they compared the change in employment in New Jersey restaurants before and after the date of New Jersey's minimum wage increase, with the change in employment during the same period in Pennsylvania. a. Explain why the authors compared the change in employment in both states, instead of just looking at the before-after change in employment in New Jersey, where the minimum wage was increased. How does collecting data on what happened in a neighboring state that did not increase the minimum wage help us understand the effects of New Jersey' 5 minimum wage? Card and Krueger found that employment in New Jersey's fast food industry increased relative to Pennsylvania's fast food industry after the increase in the minimum wage. Explain what the perfectly competititive labor markets theory would predict that would happen to employment when there is an increase in the minimum wage. Does Card and Krueger's nding support or contradict the theory? Explain at least one possible explanation for why the derence-in-dijferences strategy implemeted by Card and Krueger for estimating the effects of the minimum wage could be problematic