Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

ECON 1100: Intermediate Microeconomics

Assignment #9

Due Tuesday 11/28/2023 by 9:30 am

Answer the following questions clearly and completely. Be sure to show your work - we need to be able to see how you arrived at your answers so that we can understand your thought process and give full (partial credit if warranted). Be sure to upload your assignment to Gradescope before the deadline. You are welcome and encouraged to work in groups as long as the work you hand in is your own! Do not hesitate to stop by office hours if you have any questions or merely  wish to talk through any aspect of the problems. Work hard and goodluck!

1)   Suppose that the Shapiro administration is considering two possible policies meant to discourage production (and related air pollution) of steel in Pittsburgh, where the market for a metric ton of steel produced in Pittsburgh is characterized by the following equations for demand and supply:

Qd  =  1200 −  p

Qs  =  2p

Use this information and a graphical analysis to answer the following.

a)   What welfare effects would result from the Shapiro administration instituting a $180 per unit tax that sellers are required to pay to PA? Be sure to calculate the after-tax prices and quantity. Use a well labeled graph to clearly   illustrate the welfare effects and tax revenue (no need to calculate numerical welfare values for this problem).

b)    Find what the welfare effects would be if instead a tax the Shapiro administration set a quota of 680 units for the market. (Hint: A quota allows the combined firms to supply any amount up to, but not exceeding, 680 units total. Moreover, there are no restrictions on the price firms can charge.) Be sure to clearly draw a newmarket   supply curve in your graph that reflects the impact of this policy as apart of your answer.

c)    How do the potential policies diverge in their welfare impacts?

d)    Is the quota policy a Pareto improvement over the market equilibrium outcome before the quota/tax? Explain your reasoning in no more than two sentences.

2)    Imagine that you have started a firm and own the patent for a new technology that allows for the 3D printing of

food. This is a huge nutritional breakthrough since the printer can provide nutritional food for years. Since you are the first with this technology and have patented it, your firm is the only firm that can produce and sell this type of printer. There are no close substitutes for your printer and your data indicates weekly demand is given by the equation Qd  = 9000 − 2p.

a)   Your production analysis indicates that your firm’s cost function is C(Q)   =  F   + 1/2Q2. Illustrate the market,  showing the inverse demand curve, the MR curve and the MC curve. Then, compute and illustrate your firm’s profit maximizing price and quantity of the printer. How low must the fixed cost be to ensure that the firm is making positive profits? Make sure to clearly label all relevant curves. Finally, what is the markup on the printer (measure markup in the following way: Price/MC)?

b)    Redraw the graph, but this time shade in the areas that represent consumer surplus, producer surplus, and deadweight loss. Calculate the numerical values of each. Is this the maximum amount of welfare that this market could possibly generate? If not, how far does it fall short.

c)    If congress regulated the price of 3D food printers with the goal of maximizing society’stotal surplus/welfare,    what price should it choose? Show that price in your diagram, the corresponding quantity that your firm would provide, and explain why this price is efficient using the concepts of marginal cost and marginal benefit.

d)   Suppose instead that the government pays some of your firm’s fixed costs, such that F = $4,500,000, but

requires in return that you must charge the price which earns your firm the perfectly competitive long-run equilibrium level of economic profits. What price would the government require you to charge? How would the markup with this price compare to the markup under the monopolist’s price? Would the quantity that corresponds to this price be higher, lower, or the same as the efficient quantity found in part (c)?