MICRO PLASTIC PROJECT ECONOMIE INF. Initial Cost of techology $ 450D, OOD Installation Lost (design | Castruction) $11 1000, DOD Annual cost For Opratug / maintenance $ 3BoiDDD Duch bul Cost Annual savings from $ 6SDIDOD replacing old techolog Annal benefits to communty $ 1500, DDD Residual value of benefits aft Pict horizon $ SOOD DOD Pjet horizon 5 yrs Useful life of techology Infinite Inhest rate + 2.44% Capatalize Cost NPHI ? ! ! A Find Capartialize Cost ( P ) = 1! knowing that P = Al . ) FIND B Draw Cash flow diagram it Calculate Net presity worth ( NPHI = ?1. The following market demand and firm cost conditions describe a perfectly competitive industry p = 1000 - 0.001Q TO = 20q - 0.2q2 + 0.001q where TC is total cost. All firms are identical. Determine the long-run equilibrium price (p), market output (Q), firm output (q) and number of (identical) firms. (Hint: marginal cost is MC = 20 - 0.4g + 0.003q?) (10 marks) 2. The City of Calgary has a more or less free market in taxi service. Any respectable firm can provide taxi service as long as the drivers and cabs satisfy certain safety standards. Let us suppose that there is a constant marginal cost and average cost per trip of a taxi ride equal to $5 and that the average taxi has a capacity of 20 trips per day. Let the market demand function for taxi rides be given by Q = D(p) = 1100 - 20p, where demand is measured as rides per day and price is measured in dollars. Assume that the industry is perfectly competitive (a) What is the competitive equilibrium price per ride? What is the equilibrium number of rides per day? What is the minimum number of taxi cabs in equilibrium? (5 marks) (b) During the Calgary Stampede, the influx of tourists raises the demand for taxi rides to D(p) = 1500 - 20p. Find the following magnitudes, based on the assumption that for these 10 days in July, the number of taxicabs is fixed and equal to the minimum number found in part (a): equilibrium number of rides per day and profit per cab per day. (4 marks) (c) Now suppose that the change in demand for taxicabs in part (b) is permanent. Find the new equilibrium price, equilibrium number of rides per day, and profit per cab per day. How many taxi cabs will be operating in equilibrium? How does the new equilibrium compare to the equilibrium found in part (b). Explain why the answer found here in part (c) differs from the answer found in part (b). (4 marks) 3. Suppose that there are four identical firms in the market, each having a marginal cost given by: MC(q) = where q is the output of an individual firm. The market inverse demand is given by: P = 200 - .5Q where Q is the total amount sold in the market. (a) What is the supply curve of the industry when there is competition between the four firms? (3 marks)(b) Assume these firms behave like price takers, how much will they produce and what price will they charge? Draw the outcome on a graph. What is the individual firms producer surplus? What is the total producer surplus of the market? (3 marks) (c) Suppose the four firms join together to form a single firm monopoly. What price will the cartel charge and how much output does the cartel produce? What is producer surplus for the cartel? (Hint: the marginal cost curve for the cartel firm is the supply curve found in part (a) with MC replacing P in this equation and MR = 200 -Q). What happens to consumer surplus and total welfare? (4 marks) 4. Calculate the own price elasticity of demand in the following situations (a) A price rise from po = 2 to p1 = 5 causes quantity demand to fall from go = 30 to q1 = 15 (1 mark) (b) The demand curve is given by q = 1/p with the slope of the demand curve given by $ = -1/p2. What is the own price elasticity of demand at any point?(2 marks) (c) The demand curve is given by q = 4 - 2p with the slope of the demand curve given by dp = -2. What is the own price clasticity of demand at: (i) p = 4; and (ii) p = 10? (2 marks) 5. Suppose the cost of producing q cars and q2 trucks is 45000 +80q1 + 10092. Calculate the measure of economies of scope when (1 mark each): (a) q1 = 100 and q2 = 200 (b) q1 = 500 and q2 = 800 6. Answer the following questions True, False, or Uncertain. Give a brief explanation of your answer. 1 mark for correctly identifying T, F. or U. 4 marks for explanation. (a) If a single price monopoly is instituted in what was a competitive market, consumer surplus will decrease more than producers gain. (b) If a firm's marginal cost is less than the firm's marginal revenue then the firm should decrease output and increase price. (c) If price is less than average cost then a firm will shut down. (d) A monopolist does not make a shutdown decision in the short-run and an exit decision in the long run since only competitive firms make these decisions.4) Imagine that you are involved in a car accident with a FedEx truck and your injuries are $200,000 and the injuries to the FedEx driver are only $20,000. You are 80% at fault and the FedEx driver is 20% at fault. If this accident happened in a contributory negligent state, you would be entitled to: a. your monetary recovery would be $24,000. b. your monetary recovery would be $16,000. c. your monetary recovery would be $40,000. d. your monetary recovery would be $56,000. c. your monetary recovery would be $0. 5) Imagine that you are involved in a car accident with a FedEx truck and your injuries are $200,000 and the injuries to thee FedEx driver are only $20,000. You are 80% at fault and the FedEx driver is 20% at fault. If this accident happened in a pure comparative negligent state, such as California, or Washington, you would be entitled to: your monetary recovery would be $24,000. your monetary recovery would be $16,000. your monetary recovery would be $40,000. your monetary recovery would be $56,000. your monetary recovery would be $0. 6) Imagine that you are involved in a car accident with a FedEx truck and your injuries are $200,000 and the injuries to thee FedEx driver are only $20,000. You are 80% at fault and the FedEx driver is 20% at fault. If this accident happened here in W. Lafayette, Indiana, which follows the comparative negligence 50% rule. What would you be entitled to: your monetary recovery would be $24,000. your monetary recovery would be $16,000. C. your monetary recovery would be $40,000. your monetary recovery would be $56,000. your monetary recovery would be $0. 7) Imagine that you are the very young president of Denning Potteries, Inc., having succeeded your father, who retired unexpectedly due to illness. Your feeling of insecurity (relating to youth, inexperience, and whispers of nepotism) has just been greatly increased by your election to the presidency of the Association of Pottery Manufacturers at their annual meeting. One probable determinant in the election was your statement during the campaigning that you wished to bring order to the chaotic problems that have plagued the industry. Each member characteristically makes a broad line of products ranging from fine china to decorative pieces to earthenware for the gardening industry. The allocation of fixed costs, the determination of overhead, and the isolation of variable expenses have always been problems. Consequently, prices have seldom been perceived as closely related to real costs but have fluctuated with competitive forces in a marketplace with literally hundreds of competitors. After a hastily called meeting with your executive committee, a plan evolves. You will propose that a survey be drafted that will be distributed to all member of the association. The survey will ask for specified information from each respondent on the pricing methods employed with their respective organizations. The results will then be used by a specifically formed accounting committee to devise a standardized method of computing costs, markups, and prices for the industry. When completed, it will be provided to the members, which are all in the same industry, for their own use, if they see fit, on a