EXERCISES

1. Please draw figure so that the inverse demand schedule is Q = 100 - p (both the vertical and horizontal intercepts are at 100). Note that at p = 100, Q = 0; at p = 0, Q = 100; and at p = 50, q = 50.

2. Please draw figure so that the inverse supply schedule is Q = p. Note that at p = 100, Q = 100; at p = 0, Q = 0; and at p = $50, q = 50.

3. Find the competitive equilibrium price and quantity (set Q = p, 100 - p = p, 100 = 2p, p = ?, q = ?

4. Calculate total revenue (TR) = pQ =

5. Calculate consumers' surplus (100 - p)Q/2 =

6. Calculate producers' surplus pQ - C, where C = pQ/2 =

7. Draw identical figure to the one described in steps 1 & 2, but include marginal revenue schedule (MR) with the following equation Q = 50 - .5p

8. Calculate profit maximizing output (set Q = MR, 50 - .5p = p, 50 = 1.5p, Q = ).

9. Use the inverse demand schedule (Q = 100 - p) to calculate the profit maximizing price (set p = 100 - 33.33, p =

10. Calculate total revenue (TR) = pQ =

11. Calculate consumers' surplus (100 - p)Q/2 =

12. Calculate producers' surplus pQ - C, where C = pQ/2 =

13. Show calculation for deadweight loss D = $33.33 (16.67)/2 =

13. Calculate Price Elasticity, where p = $50, Q = 50, Price Elasticity = |?|; p = $75, Q = 25, Price Elasticity = |?|; p = $25, Q = 75, Price Elasticity = |?|

14. Calculate Price Elasticity, where p = $66.67, Q = 33.33, Price Elasticity = |?|

15. Using the inverse elasticity rule (Ramsey optimal pricing): p-mc/p = 1/|Price Elasticity| = calculate the optimal markup where Price Elasticity is |2| and marginal cost is $33.33