A project requires signing buying 500 cubic yards of concrete per week for the next year from the only local provider. The currently price is $100 per yard and the provider sells 5,000 yards per week. Assuming marginal cost is constant, elasticity of demand at the current price is -1.5, and using a linear demand approximation, estimate the opportunity cost of the weekly government purchase. The METB is 0.2. Note you will need to find the original demand, the new demand, the new price, and the new quantity purchased by those other than the government in the process.

A project requires signing buying 500 cubic yards of concrete per week for the next year from the only local provider. The currently price is $100 per yard and the provider sells 5,000 yards per week. Assuming marginal cost is constant, elasticity of demand at the current price is -1.5, and using a linear demand approximation, estimate the opportunity cost of the weekly government purchase. The METB is 0.2. Note you will need to find the original demand, the new demand, the new price, and the new quantity purchased by those other than the government in the process.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter2: Fundamental Economic Concepts

Section: Chapter Questions

Problem 2E

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A project requires signing buying 500 cubic yards of concrete per week for the next year from the only local provider. The currently price is $100 per yard and the provider sells 5,000 yards per week. Assuming marginal cost is constant, elasticity of demand at the current price is -1.5.The METB (marginal excess tax burden) is 0.2. a) find opportunity cost of the weekly government purchase (Opportunity Cost = Total Revenue – Economic Profit) b)find original demand and the new demand (Qd = a – b(P)) C)find the new price, and the new quantity purchased by those other than the government in the process.
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The estimated monthly sales of Mona Lisa paint-by-number sets is given by the formula q = 105e3p- + P, where q is the demand in monthly sales and p is the retail price in hundreds of yen. (a) Determine the price elasticity of demand E when the retail price is set at ¥700. E = Interpret your answer. The demand is going down v is advised. by % per 1% increase in price at that price level. Thus, a large price decrease (b) At what price will revenue be a maximum? hundred yen (c) Approximately how many paint-by-number sets will be sold per month at the price in part (b)? (Round your answer to the nearest integer.) paint-by-number sets per month
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Q1. Suppose the government is considering an increase in the toll on a certain stretch of highway from $3 to $4. At present, 1 million cars per week use that highway stretch; after the toll is imposed, the number of cars per week will change according to its price elasticity of demand of -0.8 (this elasticity value is estimated based on the initial-value method). If the marginal cost of highway use is constant (i.e., the supply curve is horizontal) and equal to $3 per car, what is the net annual cost to society attributable to the increase in the toll? (your answer must be rounded off to the nearest million dollars per year, i.e., no decimal places; there are 52 weeks in a year)
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