This topic contains a solution. Click here to go to the answer

Author Question: If an industry could be organized either perfectly competitively or as monopoly, a monopoly would ... (Read 43 times)

burton19126

  • Hero Member
  • *****
  • Posts: 532
If an industry could be organized either perfectly competitively or as monopoly, a monopoly would
 
  A) produce less output.
  B) produce where P > MC.
  C) charge higher prices.
  D) All of the above

Question 2

Recall that the Cobb-Douglas Utility function U(X,Y) = XaY1-a has the unusual property that the demand for each good depends only on its own price.
 
  Therefore, a consumer will always allocate the same proportion of income to each good. Specifically, the demand for X is
   X = aI/px
  where I is income and px is the price of X.
  a. What is the price elasticity of demand for X?
  b. What is the direction of the income effect on X of an increase in px?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

trog

  • Sr. Member
  • ****
  • Posts: 343
Answer to Question 1

D

Answer to Question 2

a. Using calculus,
X/px = -aI/px2
Then E = -1. Because a constant proportion of income is devoted to each good, an increase in price will be matched by an equal offsetting proportional decrease in quantity.
b. X is a normal good from the demand equation. Therefore, the income effect from a price increase will be to reduce consumption of X.




burton19126

  • Member
  • Posts: 532
Reply 2 on: Jul 1, 2018
Thanks for the timely response, appreciate it


ryansturges

  • Member
  • Posts: 338
Reply 3 on: Yesterday
:D TYSM

 

Did you know?

According to the American College of Allergy, Asthma & Immunology, more than 50 million Americans have some kind of food allergy. Food allergies affect between 4 and 6% of children, and 4% of adults, according to the CDC. The most common food allergies include shellfish, peanuts, walnuts, fish, eggs, milk, and soy.

Did you know?

Immunoglobulin injections may give short-term protection against, or reduce severity of certain diseases. They help people who have an inherited problem making their own antibodies, or those who are having certain types of cancer treatments.

Did you know?

Excessive alcohol use costs the country approximately $235 billion every year.

Did you know?

Coca-Cola originally used coca leaves and caffeine from the African kola nut. It was advertised as a therapeutic agent and "pickerupper." Eventually, its formulation was changed, and the coca leaves were removed because of the effects of regulation on cocaine-related products.

Did you know?

Cocaine was isolated in 1860 and first used as a local anesthetic in 1884. Its first clinical use was by Sigmund Freud to wean a patient from morphine addiction. The fictional character Sherlock Holmes was supposed to be addicted to cocaine by injection.

For a complete list of videos, visit our video library