ECO100Y5 Exam Solutions Fall 2018: Marginal Revenue, Average Variable Cost, Variable Cost

• School: UTM
• Department: Economics
• Course: ECO100Y5
• Professor: All

Document Summary

Page 1 of 5: assume every buyer purchases only one unit of a product, which forms the market demand may find it useful to draw your diagram in part (d) as you work through this question. (cid:1842)(cid:3404)(cid:888)(cid:887)(cid:882)(cid:3398)(cid:884)(cid:1843). The monopoly firm has constant marginal cost at (cid:887)(cid:882) and zero fixed cost. Plot the initial budget line (cid:1828)(cid:1838)(cid:2868), the new budget line (cid:1828)(cid:1838)(cid:2869) and the compensated budget line (cid:1828)(cid:1838)(cid:3030) after the price of (cid:1876)(cid:2869) increases. Then, plot the substitution effect (cid:1845)(cid:1831), the income effect (cid:1835)(cid:1831), and the total effect (cid:1846)(cid:1831) for each of the two consumers according to their indifference curves. Please note (a) adam lives in australia and his income is (cid:885)(cid:882)(cid:882). Initially, the price of (cid:1876)(cid:2869) is (cid:888) and the price of (cid:1876)(cid:2870) is (cid:883)(cid:882). Then, the price of (cid:1876)(cid:2869) increases to (cid:883)(cid:884) while the price of (cid:1876)(cid:2870) and his income remain unchanged. Page 3 of 5 (b) beatrice lives in barbados and her income is (cid:889)(cid:882)(cid:882).