Question If the demand curve for wheat in the United States i

If the demand curve for wheat in the United States is P=12.4 – Q_D where is the P is the farm price of wheat (in dollars per bushel) and Q_D is the quantity of wheat demanded (in billions of bushels), and the supply curve for wheat in the United States is P= -2.6 + 2Q_S where Q_s is the quantity of wheat supplied (in billions of bushels), what is the equilibrium price of wheat? What is the equilibrium quantity of wheat sold? Must the actual price equal the equilibrium price? Why or why not?

2. The Haas Corporation’s executive vice president circulates a memo to the firm’s top management in which he argues for a reduction in the price of the firm’s product. He says such a price cut will increase the firm’s sales and profits.
a. The firm’s marketing manager responds with a memo pointing out that the price elasticity of demand for the firm’s product is about -0.5. What is this fact relevant?
b. The firm’s president concurs with the opinion of the executive vice president. Is she correct?
3. In the following diagram, we show one of Jane’s indifference curves and her budget line.
a. If the price of good X is $100, what is her income?
b. What is the equation for her budget line?
c. What is the slope of her budget line?
d. What is the price of good Y?
e. What is Jane’s marginal rate of substation in equilibrium?

4. According to the chief engineer at the Zodiac Company, Q=AL^aK^B, where Q is the output rate, L is the rate of labor input, and K is the rate of capital input. Statistical analysis indicates that a=0.8 and B=0.3. The firm’s owner claims the plant has increasing returns to scale.
a. Is the owner correct?
b. If B were 0.2 rather than 0.3 would she be correct?
c. Does output per unit of labor depend only on a and B? Why or why not?

5. The Haverford Company is considering three types of plants to make a particular electronic device. Plant A is much more highly automated than plant B, which in turn is more highly automated than plant C. For each type of plant average variable cost so long as output is less than capacity, which is the maximum output of the plant. The cost structure for each type of plant is as follows:
Average Variable Costs
Plant A
Plant B
Plant C
Labor
$1.10
2.40
$3.70
Materials
0.90
1.20
1.80
Other
0.50
2.40
2.00
Total
$2.50
$6.00
$7.50
Total fixed costs
$300,000
$75,000
$25,000
Annual capacity
200,000
100,000
50,000
a. Derive the average costs of producing 100,000, 200,000, 300,000, and 400,000 devices per year with plant A. (For output exceeding the capacity of a single plant, assume that more than one plant of this type is built.)
b. Derive the average costs of producing 100,000, 200,000, 300,000, and 400,000 devices per year with plant B.
c. Derive the average costs of producing 100,000, 200,000, 300,000 and 400,000 devices per year with plant C.
d. Using the results of parts (a) through (c), plot the points on the long-run  average cost curve for the production of these electronic devices for outputs of 100,000, 200,000, 300,000 and 400,000 devices per year.

6. In 2008, the box industry was perfectly competitive. The lowest point on the long-run average cost curve of each of the identical box producers was $4, and this minimum point occurred at an output of 1,000 boxes per month. The market demand curve for boxes was Q_D=140,000 – 10,000P
Where P was the price of a box (in dollars per box) and Q_D was the quantity of boxes demanded per month. The market supply curve for boxes was Q_S=80,000 + 5,000P
Where Q_S was the quantity of boxes supplied per month.
a. What was the equilibrium price of a box? Is this the long-run equilibrium price?
b. How many firms are in this industry when it is in long-run equilibrium?

7. The Wilson Company’s marketing manager has determined that the price elasticity of demand for its product equals -2.2. According to studies she carried out, the relationship between the amount spent by the firm on advertising and its sales is as follows:
Advertising Expenditure
Sales
$100,000
$1.0 million
$200,000
$1.3 million
$300,000
$1.5 million
$400,000
$1.6 million
a. If the Wilson Company spends $200,000 on advertising, what is the marginal revenue
from an extra dollar of advertising?
b. Is $200,000 the optimal amount for the firm to spend on advertising?
c. If $200,000 is not the optimal amount, would you recommend that the firm spends more
or less on advertising?

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