Q1a. ( c )
Q1b. ( b )
Q2.
a)
- Since , and . When more labour is employed, increases, so increases. When the difference between , which is increases in a larger ratio (due to inefficientuse of labour) than does, aincreasing will be observed.
- Firstly, , asincreases, increases. Also, increases because more labour get employed to increase . Therefore, increases as well. Since , initially, the increase of is bigger than the increase in due to the efficient use of increasing labour (divisionof works and workers’ co-operation etc.) So decreasing will be observed as a result.
However, when the increase ofgetting smaller than the increase in due to the inefficient use of any exceed labour(insufficient space for workers etc.) In this case, will start the increase.
b)
- In aprefect competitive market, can maximized the benefit of suppliers. In a short run (at leastone factor of production is fixed), when , the firm is making a negative benefit (loss) and it should existthe market (see the illusion behind). Therefore, the condition for a firm tokeep supplying is .
Image: Loss as MC<AVC
-As itshows above, when , the firm will shut down and stop supplying. In this case, thesupply curve will not be represented by the marginal cost curve as the supply =0.
Q3.
a) Elasticity: Represents the percentage change inquality demanded resulting from a very small percentage change in price. It capturesthe responsiveness of the demand to the changes in price.
b) A math hypothesis driven from p.55 of the textbook:
Image: 计算弹性
As itshows above, since the formula of elasticity is (derivation shows below), ina linear function, slope remains constant. However, since the base is increasing along the two axes, they will be affected less andless by the same ratio of growth in each of them (or less sensitive towards thesame ratio of change as they are increasing).
Derivation:
By definition, .
.
Since, so
Q4.
At the competitiveequilibrium, . So at equilibrium price PE=20, .
Use Pintercept (PQ=0, QQ=0) as the other point. At P intercept,Q=0.
Therefore,. So the other point (PQ=0, QQ=0) is (0, 50)
.
Theabsolute value of the price elasticity at the competitive equilibrium is .
Q5.
At the competitiveequilibrium, .
So at equilibriumprice PE=9, .
Theequilibrium quantity of the market is 15 tons, and the equilibrium price is$9/ton.
Q1b. ( b )
Q2.
a)
- Since , and . When more labour is employed, increases, so increases. When the difference between , which is increases in a larger ratio (due to inefficientuse of labour) than does, aincreasing will be observed.
- Firstly, , asincreases, increases. Also, increases because more labour get employed to increase . Therefore, increases as well. Since , initially, the increase of is bigger than the increase in due to the efficient use of increasing labour (divisionof works and workers’ co-operation etc.) So decreasing will be observed as a result.
However, when the increase ofgetting smaller than the increase in due to the inefficient use of any exceed labour(insufficient space for workers etc.) In this case, will start the increase.
b)
- In aprefect competitive market, can maximized the benefit of suppliers. In a short run (at leastone factor of production is fixed), when , the firm is making a negative benefit (loss) and it should existthe market (see the illusion behind). Therefore, the condition for a firm tokeep supplying is .
Image: Loss as MC<AVC
-As itshows above, when , the firm will shut down and stop supplying. In this case, thesupply curve will not be represented by the marginal cost curve as the supply =0.
Q3.
a) Elasticity: Represents the percentage change inquality demanded resulting from a very small percentage change in price. It capturesthe responsiveness of the demand to the changes in price.
b) A math hypothesis driven from p.55 of the textbook:
Image: 计算弹性
As itshows above, since the formula of elasticity is (derivation shows below), ina linear function, slope remains constant. However, since the base is increasing along the two axes, they will be affected less andless by the same ratio of growth in each of them (or less sensitive towards thesame ratio of change as they are increasing).
Derivation:
By definition, .
.
Since, so
Q4.
At the competitiveequilibrium, . So at equilibrium price PE=20, .
Use Pintercept (PQ=0, QQ=0) as the other point. At P intercept,Q=0.
Therefore,. So the other point (PQ=0, QQ=0) is (0, 50)
.
Theabsolute value of the price elasticity at the competitive equilibrium is .
Q5.
At the competitiveequilibrium, .
So at equilibriumprice PE=9, .
Theequilibrium quantity of the market is 15 tons, and the equilibrium price is$9/ton.
