Economics Help
1. Suppose that there are two states that do not trade: Iowa and Nebraska. Each state produces the same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat is 3 bushels of corn. For Nebraska the opportunity cost of producing 1 bushel of corn is 3 bushels of wheat. Present production is:
| |Iowa |Nebraska |
|Wheat |20 million bushels |120 million bushels |
|Corn |120 million bushels |20 million bushels |
a. Explain how, with trade, Nebraska can wind up with 40 million bushels of wheat and 120 bushels of corn while Iowa can wind up with 40 million bushels of corn and 120 million bushels of wheat.
b. . If the states ended up with the numbers given in a, how much would the trader get?
2) The Ali Baba Co is the only supplier of a particular type of Oriental carpet. The estimated demand for its carpets is Q= 112,000 – 500P + 5M, where Q= number of carpets, P= price of carpets (dollar per unit), and M= consumers income per capita. The estimated average variable cost function for Ali Baba’s carpets is AVC= 2000 – 0.012Q + 0.000002Q2
Consumers income per capita is expected to be $20,000 and total fixed cost is $100,000
1. How many carpets should the firm produce in order to maximize profit?
2. What is the profit maximizing price of carpets?
3. What is the maximum amount of profit that the firm can earn selling carpets?
4. Answer parts a through c if consumer’s income per capita is expected to be $30,000 instead.
3)Ever Kleen Pool Services provides weekly swimming pool maintenance in Atlanta. Dozens of firms provide this service. The service is standardized;each company cleans the pool and maintains the proper levels of chemicals in the water. The service is typically
| |Iowa |Nebraska |
|Wheat |20 million bushels |120 million bushels |
|Corn |120 million bushels |20 million bushels |
a. Explain how, with trade, Nebraska can wind up with 40 million bushels of wheat and 120 bushels of corn while Iowa can wind up with 40 million bushels of corn and 120 million bushels of wheat.
b. . If the states ended up with the numbers given in a, how much would the trader get?
2) The Ali Baba Co is the only supplier of a particular type of Oriental carpet. The estimated demand for its carpets is Q= 112,000 – 500P + 5M, where Q= number of carpets, P= price of carpets (dollar per unit), and M= consumers income per capita. The estimated average variable cost function for Ali Baba’s carpets is AVC= 2000 – 0.012Q + 0.000002Q2
Consumers income per capita is expected to be $20,000 and total fixed cost is $100,000
1. How many carpets should the firm produce in order to maximize profit?
2. What is the profit maximizing price of carpets?
3. What is the maximum amount of profit that the firm can earn selling carpets?
4. Answer parts a through c if consumer’s income per capita is expected to be $30,000 instead.
3)Ever Kleen Pool Services provides weekly swimming pool maintenance in Atlanta. Dozens of firms provide this service. The service is standardized;each company cleans the pool and maintains the proper levels of chemicals in the water. The service is typically