1.

The monopsonists labor demand function is . Find the wage and the employment.

and its

labor supply function is MRC = TC; TC = ARC*L = (6 + L)*L = 6*L + L^2; MRC = 6 + 2*L; MRP = 102 2*L; 6 - 2*L = 102 2*L; 4*L = 96; L = 24; W = MRC = 6 +2*L = 54; 2.

The monopsonists labor demand function and labor supply function are: . The trade union fixed the minimum hour wage

equal 40 Rub. How will change the employment? MRP(L) = MPC(L); MRP(L) = 102 2*L; MRC(L) = (Profit); Profit = ARC*L; Profit = (6 + L)*L (Profit) = 6 + 2*L; 102 2*L = 6 + 2*L; L = 24; 102 2*L = 40; L = 31; 3. The firms total revenue function is and its total cost function

is TC = 0,1L + 1 (where L is amount of labor in thousand hours). What is the amount of labor if the firm maximizes its profit? MR = 2,5*L^(-0,5) = MC; MC = (TC) = 0,1;

2,5*L^(-0,5) = 0,1; L = 625; 4. The labor supply and the labor demand functions are: = 10 + W; = 100 W. Find: wages and quantity of labor; how will change the wage if labor supply in the given branch is regulated by the trade union? 10 + 0,5*W = 100 W; 1,5*W = 90; W = 60; L = 40; MRP(L) = MRC(L); TR = W*L = (2*L 20)*L; -0,5*W = 10 L(S); W = 2*L 20; MR(L) = 4*L 20; MRC = L(S) = 2*L 20; 4*L 20 = 2*L 20; -4*L = -120; L = 30; W = 40. 5. factor The firms production function is . The total revenue function is In the short-run period the firm uses labor (L) as the unique variable

TR = 5Q. The wage (W) = 400. Find the reverse labor demand function and the labor demand elasticity. MRP(L) = MRC(L); MRP(L) = (TR); P = 5; MRP(L) = MP(L)*P;

MP(L) = (Q) = 100 2*L; MRP(L) = (100 -2*L)*5 = 500 10*L; MRC(L) = W = 400; 500 10*L = W; -10*L = W 500; L = - (W 500)/10; E = 1/(-2) = - 0,5; 6. In the market of monopolistic competition the firms long-run function of

the average total costs is AC = Q + 10. The demand function for the firms output is P = 150 3Q. Calculate the firms equilibrium price and output. Is the firm in the long-run or in the short-run equilibrium? AC=Q+10; MR=MC; TR=P*Q; TR=1500-3*Q^2; MR=150-6*Q; TC=Q^2+10*Q; MC=2*Q+10; 1506*Q=2*Q+10; 8Q=160; Q=17.5; P=150-3*17.5; P=97; P=97.5-27.5=70; 7. The cost function of the competitive firm is TC = 2 - 8 + 12 q. The market

price for the goods is 44 Rub for one unit. Calculate the profit of the short-run period. Find out the branch market price under condition that short-run costs become long-run costs. TC=2*Q^3-8*Q^2+12*Q; P=44; =P*Q-TC; =P*Q-2*Q^3+8*Q^3-12*Q; MC=TC=6*Q^2-16*Q+12=44; Q1=-4/3; Q2=4; TR=176=44*4; TC=2*64-8*16+48=48; =176-48=128; ATC=P; =0; ATC=TC/Q=2*Q^2-8*Q+12;

ATC=4*Q-8=0; Q=2; ATC=4=P; 8. The monopolists demand function is Q = 52 2P. The firms total costs

function is TC = 8.5 10q. Calculate the output that maximizes the firms profit and the volume of the profit. What should be the firms behavior in the long-run period?

Q=52-2*P; TC=8.5*Q^2-10*Q; MR=MC; MC=TC=8.5*Q^2-10=17*Q-10; 26-Q=17*Q-10; Q=2; P=25; TR=P*Q=(26-Q/2)*Q=26*Q-Q^2/2; MTR=TR=26-Q; P=26-0.5*Q; TR=(26-0.5*Q)*Q=26*Q-0.5*Q^2; MR=26-Q; =TR-TC=26*Q-0.5*Q^2-8.5*Q^2-10*Q=16*Q-9*Q^2=36; 9. The branch demand function for computers is P = 100 2Q. The marginal

cost function of the firm - leader is MC = 0.5q + 6. The supply function of all other computer produces in the given branch is 0.5P + 4 . Find out the outputs of the leader, of the branch and the computer market price. P=100-2*Q; Q=50-0.5*P; Q=0.5*P+4; MC=0.5*Q+6; Ql=50-0.5*P-0.5*P-4=46-P; Q=50-0.5*30=35; P=46-Ql; TR=46*Ql-Ql^2; MR=46-2*Ql; 0.5*Ql+6=46-2*Ql; 2.5*Ql=40; Ql=16; P=46-16=30;

10.

In the market of the monopolistic competition the firms long-run average

total cost function is AC = 16 50q + 40. The firms demand function is Q = 2 0.5P. What are the firms long-run output and price? AC=16*Q^2-50*Q+4; Q=2-0.5*P; P=4-2*Q; TC=16*Q^3-50*Q^2+40*Q; MC=48*Q^2-100*Q+40; TR=4*Q-2*Q^2; MR=4-4*Q; MC=MR; 50*Q^2-104*Q+40=0; P=AC; 16*Q-48*Q+36=0; 4*Q^2-12*Q+9=0; D=144-144=0; Q=12+-0/8=3/4; P=1; 11. The oligopolists profit is 12 000 Rub per month. Its output is 600 000

units. The firm maximizes profit and its costs per one unit of goods are 80 Rub. Calculate the firms monopoly power. =12000; Q=600000; ATC=80; 12000/600000=0.002 RUR; P=80+0.002=80.02 RUR; (P-AC)/P=(80.02-80)/80.02=0.0025; 12. In the oligopoly market 10 firms set up a cartel. The total cost function of

each firm is TC = 5 000 + 10 Q + 0.5*Q^2. The branch demand function is Q = 2 200 100 P. Find each firms output and the price. MR = MC; P = (- Q + 2200)/100; MR = TR = (P*Q) = (-(Q^2 + 2200*Q)/100) = 0,01*(-2*Q + 2200); TC(BR) = 10*TC = 50000 + 100*Q + 5*Q^2; MC = (10*TC) = 10*Q +100; 10*Q + 100 = 0,01*(-2*Q + 2200); 10*Q + Q/50 = 2100; 501*Q/50 = 2100; Q(BR) = 105000/501 = 209,58; Q(firm) = 20,958; P = 21,79;

13.

Suppose a monopolist faces a demand curve for output of the form p(y) =

100 2y. The production function takes the simple form y = 2x, and the factor costs $4 per unit. How much of the factor of production will the monopolist want to employ? How much of the factor would a competitive industry employ, if all the firms in the industry have the same production function? P(y) = 100 4*X; MRP(F) = MRC(F) = P = 4; MRP = MP(F) P; TR = (100 2*Y)*Y = 100*Y 2*Y^2 = 250*X 8*X^2 = 2*X*(100 4*X); (2*X) = 2 = MP(F); MR = 100 16*X; MRP = MRC = 4 = p; 100 16*X = 4; 25 4*X = 1; X = 6; P = 100 2*Y; 2 = 100 2*Y; Y = - 49; P = -20 14. The firm works in the competitive market. Its production function in the

short-run period is Q = 200*L^0,5 (where L is the number of employees). The price of one unit of good is $3. Wage is $30 (the labor market is competitive). How many workers will be employed if the firm maximizes its profit? MRP(L) = MRC(L); MRP = P*MP(L) = 3*MP(L) = 30; 3*MP(L) = Q = 100/(L^0,5) = 30; L = 100;

17.

The monopolist runs two enterprises. The marginal cost function of the

first enterprise is MC1 = 5 + Q1, and of the second = 4 + 0,5*Q2 The monopolist demand function is P = 65 Q (Q = Q1 + Q2). What is the monopolist profit maximizing output? MC1=5+Q1; MC2=4+1/2*Q2; P=65-Q*(Q=Q1+Q2); MR (Q=MC1/Q2)=MC2(Q2) TR=P*Q=65*Q-Q^2; MR=TR=65-2*Q; MR=MC; 65-28Q=5+Q1; 65-2*Q1-2*Q2=5+Q1; 2*Q2=65-5-2*Q1-Q1; Q2=(60-3*Q1)/2; MC2=4+(60-3*Q1)/4; 5+Q1=4+(60-3*Q1)/4; Q1=8; Q2=(60-3*8)/2=18; Q=8+18=26; 15. In the competitive branch there are 100 identical firms. The cost function

of its firm is TC = Q^3 4*Q^2 + 20Q (in thousand dollars). Q is the output measured by thousand units. What is the market price and the branch output in the long-run equilibrium? N=100; TC=Q^3-4*Q^2+20*Q; Pel=ATCmin; ATC=(Q^3-4*Q^2+20*Q)/Q=Q^24*Q+20; 2*Q-4=0; Q=2; Pel=4-4*2+20=16; Qbran=2*100=200; 16. A monopolist sells in two markets. The inverse demand curve in market 1

is p = 100 Q1. The inverse demand curve in market 2 is p = 200 Q2. The firms total cost function is C(q1 + q2) = (q1 + q2)2. The firm is able to price discriminate between the two markets. Find the prices that the monopolist will charge in each market. P1=100-Q1; P2=200-Q2; C(Q1+Q2)=TC; TR1=P1*Q1=100*Q1-Q1^2; TR2=P2*Q2=200*Q2-Q2^2;

MR1=100-2*Q1; 100-2*Q1=2*Q1+2*Q2; MR2=200-2*Q2; 200-2*Q2=2*Q1+2*Q2; MC=2*(Q1+Q2); 4*Q1=100-2*Q2; 4*Q2=200-2*Q1; Q1=25-1/2*Q2; 4*Q2=200-50+Q2; Q2=50; Q1=0; 17. At the end of the 17th centuary in the UK the agricultural output was

below the average level by 30%. The price of grain was above the average level by 16%. Derive the function of the dependence between the price and output. (Suppose that this dependence is linear). The average level of prices for grain was 40 shillings per 1 pound. The average grain output was 20 million tons. P=40 Q=20 mln.tons 40=a+b*20; (40+40*0.16)=a+b*(20-20*0.3); A= 184/3; b=-16/15; P=183/3-16/15*Q 18. The domestic market of a small country is described by the following

demand and supply functions The world price is P = 50. Find the losses and gains of the domestic producers and consumers under condition of free competition In the world and in the domestic markets.

In the case of free competition the Qs = 0 on domestic market, while Qd = 50. However, this means that:

In market competition, domestic suppliers shall lose 75*25=1875; domestic consumers shall gain 625=(25*75-25*50) for the same level of consumption. 3. The elasticity of supply on capital is 0,4; the elasticity of supply on labor is 0,5. The volume of used capital increased by 5%; the volume of used labor decreased by 6%. Calculate, what is the percent change of the output. Ec = 0,4; El = 0,5; 0.4=0.05/P for Capital; 0.5=-0.06/-P for Labor; Pc=0.125; Pl=-0.12; As Q=F(K,L), thus Q=Pc/Pl=0.125/0.12=1.04. So, the output has changed by +4% 4. The production technology is described by the function (where are the resources). The prices of the first and second resources are . Calculate the costs of 30 units of output. 30=2*X1+X2 X1=11,8; X2=6,4 We need the whole number, because units are indivisible. X1=12; X2=7 Thus, 12*8+7*5=96 5. The land supply is Q = 100 (acres of land). The agricultural demand for land is Q = 100 p. Nonagricultural demand for land is Q = 50 p, (where p is the price of 1 acre of land in thousand rub.)

Find: 1) price of land; 2) the annual lease payment for land (the rate of interest is 10%); 3) the ground rent if the annual depreciation is 0,5 thousand Rub. and invested capital is 10 thousand Rub.

1) Q=100-P+50-P=150-2*P; 100=150-2*P; P=25 th.RUR; 2) P=((annual lease payment)/interest rate)*100; 25=(ALP/10)*100=2.5 th.RUR; 3) =(0,1;-10000;X1;X2X51). Using Solver.xlam we can find that we get =25000 if the ground rate is 3782,219