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ECON 213 ECON213 ECON/213 ENTIRE COURSE HELP – LIBERTY UNIVERSITY

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ECON 213 ECON213 ECON/213 ENTIRE COURSE HELP – LIBERTY UNIVERSITY

ECON 213 Problem Set 3

ECON 213 Problem Set 4

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ECON 213 ECON213 ECON/213

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ECON 213 ECON213 ECON/213 Principles of Microeconomics - Liberty University, ECON 213 Problem Set 3, ECON 213 Problem Set 4

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ECON 213 ECON213 ECON/213 ENTIRE COURSE HELP – LIBERTY UNIVERSITY

ECON 213 Problem Set 3

ECON 213 Problem Set 4

ECON 213 ECON213 ECON/213 ENTIRE COURSE HELP – LIBERTY UNIVERSITY

ECON 213 Problem Set 3

Problem Set 3

1. Data for the market for graham crackers is shown below. Calculate the elasticity of demand between the following prices.

Price of crackers Quantity Demanded (per month)

$3 80

$2.5 120

$2 160

$1.5 200

$1 240

$1.00 – $1.50: ___________________________________

$1.50 – $2.00: ___________________________________

$2.00 – $2.50: ___________________________________

$2.50 – $3.00: ___________________________________

If the price of graham crackers is $2.50 should firms raise or lower their prices if they want to increase revenue? Explain this in terms of elasticity.

2. Assume the competitive market shown below faces a short run price of $10. Using the graph below, identify the following:

Profit maximizing output: _______________________

Approximate mark up over cost _______________________

In the long run, the price falls to $7.50. Why does this happen?

What is the new profit maximizing output? _______________________

3. A local hardware store is trying to decide whether to stay open. They have found that their industry is extremely competitive and profits have shrunk considerably. Knowing that you have taken an economics course the owners have asked for your opinion. Draw a completely labeled graph to help you explain the shutdown decision. You should show two graphs in your answer, one for the market as a whole, and one for this store in particular. Assume that the store is losing money; however, explain why they may want to stay open for a little while longer. (NOTE: Your answer should be a written explanation of your graph.)

4. What combination of the two goods below allows you to maximize your utility with a budget constraint of $14? Show how you arrived at your conclusion in the space provided below. Place your final answers on the lines at the bottom of this page.

PRICE = $0.50 per pint

Bottles of glue Total Utility (Utils)

1 15

2 23

3 30

4 35

5 38

6 40.5

PRICE = $2.00 per box

Bales of hay Total Utility (Utils)

1 10

2 22

3 36

4 52

5 70

6 90

Bottles of glue: _________________________

Bales of hay: ____________________________

ECON 213 ECON213 ECON/213 ENTIRE COURSE HELP – LIBERTY UNIVERSITY

ECON 213 Problem Set 4

Problem Set 4

1. Movies are distributed in a variety of forms, not just first run theatrical presentations. What other ways are movies distributed? What are the different price points? Using this information, draw a fully labeled graph of the market for movies in which the distributor of the film price discriminates. (NOTE: This should not be perfect price discrimination.)

2. Assume the following game is played one time only. Based on the information in the payoff matrix, PNC Bank and Citizens Bank are considering an implicit collusive agreement on interest rates. Payoffs to the two firms are represented in terms of profits in thousands of dollars:

Citizens Bank

Collude: Raise Rates Defect: Keep Rates where they are

PNC Collude: Raise Rates (900, 600) (700, 800)

Defect: Keep Rates where they are (1100, 300) (800,400)

a) Does PNC have a dominant strategy? What is it? Does Citizens have a dominant strategy? What is it?

b. Does the result of your answer change if the game is played an infinite number of times? Why or why not. Properly use game theoretic terminology in your answer.

3. What is the profit maximizing output of the monopolist shown below?

What price do they set? _______________________

What is the mark up over cost? _______________________

Why will this price not fall?

4. Draw the cheese market for the United States showing the world price as the price for this market. How much cheese does the U.S. import at the world price? Now assume that the cheese lobby promotes and successfully gains a tariff on cheese. What happens to the price paid by cheese lovers in the U.S.? How does this change the value generated by the market? Why do you say this? Where does this appear in your graph?