Question
Hi! I'm very confused :( Please teach me how to solve these :( In 2018, WePlay Games raised the price of its monthly subscription from
Hi! I'm very confused :( Please teach me how to solve these :(
In 2018, WePlay Games raised the price of its monthly subscription from $5 to $7.50, and the number of subscribers fell by 10%. In 2019, it raised the price again from $7.50 to $10.00, and its revenue increased by 5%.
a)What was the price-elasticity of demand for WePlay Games' product in 2018?
b)What was the price-elasticity of demand for WePlay Games' product in 2019?
c) What might explain the difference in the elasticities in 2018 and 2019?
Suppose the market supply and demand for electricity in Luna city are:
Qs = 10 P
Qd = 100 - 10 P
where Qs is the quantity supplied of electricity, Qd is the quantity demanded of electricity, P is the price of electricity.
a)What would be the equilibrium price and quantity if electricity is competitively supplied?
b)What would be the levels of consumer surplus and producer surplus?
c)What would be the equilibrium price and quantity if the market is supplied by a monopoly? (hint: from the demand function, we know the monopolist's marginal revenue: MR = 10 - 0.2 Q)
d)Suppose the market is supplied by a monopoly, and you are the regulator wanting to achieve the competitive outcome, how would you regulate the monopoly?
Ten families in a block of flats share a large rubbish bin. The bin is emptied every Friday by the city council, but it is often overfull by Thursday.
a)Is this an example of the tragedy of commons? Explain.
b)How would you solve the problem? Explain how your solution may work.
CD Finance intends to issue bonds to finance its microlending operations. It has commissioned Far-East Credit (a credit assessment company in China) to assess its credit and obtained an AA+ rating.
a)Use the concept of information asymmetry to explain why CD Finance would want to obtain a credit rating?
b)Should CD Finance or potential bond investors commission the credit rating service? Explain.
c) If CD Finance issues more bonds over time, should its ratings be adjusted? Explain.
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