Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Textbook Question
Chapter 17, Problem 17.10P
Wonopoly and natural resource prices
Suppose that a firm is the sole owner of a stock of a natural resource.
a. How should the analysis of the maximization of the discounted profits from selling this resource (Equation 17.63 be modified to take this fact into account?
b. Suppose that the demand for the resource in question had a constant elasticity form
c. How would the answer to Problem 17.7 be changed if the entire crude oil supply were owned by a single firm?
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Assume that the quarterly demand for an SUV
produced by an automobile company is Qd :
150,000 – 1.5P, where Qd is quantity demanded
-
and P is price per vehicle.
A. Using the concept of elasticity of demand, what
price should be charged to maximize revenue
from sales of this SUV?
B. Derive the equation for total revetiue for this
product. Clearly show you steps.
C Using (b) above, determine the unit price that
maximizes total revenue from sales.
Smooth Sailing, Inc., has estimated the demand function for its sailboats (quantity purchased annually) as follows:
QD= 89,830-40PS+20Px+15Py+2I+0.001A+10W
Where,
QD = quantity purchased,
PS = the price of smooth sailing sailboats,
PX = the price of Company X’s sailboat,
PY = the price of Company Y’s motorboat,
I = per capita income in dollars,
A = dollars spent on advertising, and
W = number of favorable days of weather in the southern region of the United States.
Suppose that PS = $9,000, PX = $9,500, PY = $10,000, I = $15,000, A = $170,000, and W = 160. Find the price elasticity of demand at that point.
Is elastic, inelastic, or unitary elastic in part (a)? Justify?
Refer to the company that you proposed in the previous question.
For each scenario below, use a supply and demand analysis to make a prediction regarding both the equilibrium price and quantity for your good or service. That is, for each part, tell me whether you expect the equilibrium price of your product to rise or fall AND whether you expect equilibrium quantity to rise or fall.
Also include in your explanation which curve is shifting and which shifter variable is affected.
a) Your customers’ incomes increase. Be sure to note whether the good or service you are providing is a normal good or an inferior good.
b. The minimum wage is raised in your area, and you must pay your employees more. (Assume you have employees for this scenario, even if that was not part of your initial plan.)
c. A firm that offers the same good or service moves into town.
d. Your customers expect the price of your good or service to fall in the future.
e. The price of a good or service that…
Chapter 17 Solutions
Microeconomic Theory
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