QuickLearn Driving School trains learner drivers. The number of candidate drivers it can train per week is given by q= 10 min (k, l )′, where k is the number of vehicles the firm hires per week, l is the number of instructors hired each week, and g is a parameter indicating the returns to […]

Because firms have greater flexibility in the long run, their reactions to price changes may be greater in the long run than in the short run. Paul Samuelson was perhaps the first economist to recognise that such reactions were analogous to a principle from physical chemistry termed the Le Châtelier’s Principle. The basic idea of

Assume each firm in a perfectly competitive market has an identical cost structure such that long-run average cost is minimised at an output of 20 units (qi= 20). The mini-mum average cost is €10 per unit. Total market demand is given by . a. What is the industry’s long-run supply schedule? b. What is the

Suppose that the demand for skateboard is given by and that the long-run total operating costs of each skateboard manufacturer in a competitive industry are given by Entrepreneurial talent for skateboard manufacturing is scarce. The supply curve for entrepreneurs is given by where w is the annual wage paid.  Suppose also that each skateboard manufacturer

A monopsony in the garment district faces a supply curve for workers given by where l is the number of workers hired and w is their hourly wage. Assume also that the firm’s labour demand (marginal revenue product) curve is given by a. How many workers will the firm hire to maximise his profits, and

Golden Mining Company is a monopsony and can hire any number of female workers or male workers it wishes. The supply curve for women is given by and for men by where wf and wm are the hourly wage rates paid to female and male workers, respectively. Assume that Golden Mining is a price-taker in the international

Local fishermen sell their daily catch at the local fish market at a price of €5 per kilo. The production function for village output is where x is the quantity of bait used each week. Bait is only available from the neighbouring village who charge €10 per day to collect it from the foreshore. The

As wine ages, its value increases. One Euro of wine at year 0 is worthEuros at time t. If the interest rate is 5 per cent, after how many years should a vineyard sell wine in order to maximise the PDV of this sale?

A single firm monopolises the entire market for widgets and can produce at constant average and marginal costs of €10.Originally, the firm faces a market demand curve given by Q=60−P. a. Calculate the profit-maximising price and quantity for the monopoly. What are the firm’s profits? b. If the demand curve shifts to Q=45−0.5P determine the

a. Consider first an ad valorem tax on the price of a monopoly’s good. This tax reduces the net price received by the monopoly from P to P (1 −t) −where t is the proportional tax rate. Show that, with a linear demand curve and constant marginal cost, the imposition of such a tax causes