Microeconomics Term Assignment:Assume that a business firm finds that its profit is greatest when it produces $140 worth of product X. Suppose also that each of the three techniques shown in the table

economics

Description

ECON 1006 Introduction to Microeconomics Term Assignment Worth 20% 1. [4 Marks] Assume that a business firm finds that its profit is greatest when it produces $140 worth of product X. Suppose also that each of the three techniques shown in the table will produce the desired output. Resource Unit Price ($) Number of Resources Required Technique 1 Technique 2 Technique 3 Labour 6 10 4 6 Land 8 4 8 4 Capital 4 4 8 10 Materials 4 8 4 6 a) [1 Mark] Given the factor prices shown, which technique will the firm choose? Why? b) [1 Mark] What are the profits/losses in this industry and will the industry expand or contract? c) [1 Mark] Suppose a new technique is developed that requires 4 units of labour, 4 units of land, 12 units of capital, and 6 units of materials. Will producers adopted the new technique? Why or why not? d) [1 Mark] Suppose that the price of labour falls to $3 but the prices of other resources remain unchanged. Will the change affect producers’ decisions? Why or why not? (for this part you may assume that the producers have four techniques available) 2. [4 Marks] The following table shows the demand and supply schedules for rental apartments in the city of South Bay. Monthly Rent Apartments Demanded Apartments Supplied $2,500 20,000 40,000 $2,000 25,000 35,000 $1,500 30,000 30,000 $1,000 35,000 25,000 $500 40,000 20,000 a) [1 Mark] What are the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied? b) [1 Mark] If the municipal government can enforce a rent-control law that sets the maximum monthly rent at $1500, will there be a surplus or a shortage and if so, how large will it be? c) [1 Mark] Suppose that a new government wants to help renters by lowering the maximum rental price to $1000 per month. What effect will this change have on the market? d) [1 Mark] Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply of housing. Assuming that demand remains unchanged, by how many units of public housing would the government have to provide in order to increase the supply of housing so that the market equilibrium rental price is $1000 per month?


Related Questions in economics category