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31 Aug 2018

Assume the following specific demand equation: p = 9 – 0.3q; r = 0.1; R= 80; mc = 2.

Suppose the resource price is currently $3 per unit.

What is the depletion year for this resource under perfection completion?

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Collen Von
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31 Aug 2018

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Related questions

The inverse demand curve for a product using resource X is given by

P = 60 – 0.2Q and the cost of production is constant at

MC = 10

Find the static equilibrium for this product (recall at equilibrium Supply equates Demand and in this case Supply = Marginal Cost) in a single time period (call this t0).

At equilibrium S = D and S = MC = 10

So you should be able to solve these equations simultaneously to find Q

Draw the static equilibrium.

Equilibrium, you will recall, in a static sense is simply where demand equals supply. Now that you know the equilibrium Q you should be able to draw where supply crosses demand (the price should just line up with S and MC because they are flat in this case).

What is the value of consumer surplus from consumption in t0? (recall, this is simply the area under the demand curve and above the price, which now equates Marginal Cost)

This should be a matter of measuring the area of a triangle (i.e. half a square – height* width*0.5).

Imagine that resource X is infinite in supply or perfectly renewable and that the demand and supply curves are unchanged between years.

1. Which of the following is characteristic of the marginal revenue product schedule for a resource?

a. It approximates the firm's demand curve for the resource.

b. It measures the change in total revenue resulting from employing an additional unit of the resource.

c. It is determined by multiplying the marginal product of the resource by the marginal revenue of the good produced.

d. All of these are true.

 

2. Assume Ajax Company employs 100 workers and the total revenue is $400,000 per week. When Ajax Company employs 101 workers, the total revenue is $405,000. The marginal revenue product of the 101st worker is:

a. $40,000.

b. $5,000.

c. $405,000.

d. none of these.

 

3. The optimal number of workers to be hired by a firm operating in a competitive labour market is where:

a. P = MRP.

b. MP = MRP.

c. MRP = w.

d. P = w.

 

Kalamazoo Competition-Free Concrete (KCC) is a local monopolist of ready-mix concrete.

Its annual inverse demand function is P= 80 - 0.5Q

where P is the price, in dollars, of a cubic yard of concrete and Q is the number of cubic yards sold per year.

Suppose that Kalamazoo's marginal cost is: MC = 55 + 0.25Q


a. What is its profit-maximizing sales quantity and price? Round to the nearest whole number.

b. What is the value of the MC at is profit-maximizing sales quantity? Round to the nearest whole number.

c. What is the elasticity of demand for this product?

 

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