Suppose government establishes  - Expert Answers

Suppose government establishes - Expert Answers

1.  Suppose government establishes a price ceiling of $3.70 for wheat. What might prompt it to establish this price ceiling? Explain carefully the main effects. Demonstrate your answer graphically.

2.    What is the formula for measuring the price elasticity of supply? Suppose the price of  apples

Distinguish between explicit and implicit costs, giving examples of each. Why does the economist classify normal profit as a cost? Is economic profit a cost of production? Explain why or why not.   

 Explain why marginal product eventually declines and ultimately becomes negative. What bearing does the law of diminishing returns have on marginal costs? Be specific.                                                          

1.    Briefly state the basic characteristics of pure competition. Strictly speaking, pure competition has probably never existed and probably never will. Then why study it?

2a.    Use the following demand schedule to determine total revenue and marginal revenue for each possible level of sales: LO2

Product       Quantity Total   Marginal

Price            Demanded           Revenue         Revenue 

     $2               0          $   product price X Quantity demanded = total rev so 2X0=0

                        Marginal revenue = 2
   2                   1          $          2          $
   2                  2           $          4          $  
   2                  3           $          6          $  
   2                  4           $          8          $
   2                 5            $ 10

   a.   What can you conclude about the structure of the industry in which this firm is operating? Explain.
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