Tutorial 12 Market structure exercises for 19 points

Tutorial 12: Market structure, exercises for 19 points

Exercise I (5 points) The population demand function of a product Qd=8 -P. The supply function of the product is Qs= -5+2 P, where Qd and Qs – demand supply volumes in mln units per year, P – price in tg. 1) 2) 3) 4) Determine the equilibrium price and sales volume Assume that the fixed price is set 3 tg per unit. Determine sales volume and the volume of unsatisfied demand (deficit). Assume that a new tax paid by a seller in an amount of 2 tg per unit was introduced to this product. Find the equilibrium sales volume and prices for a customer (P+) and seller (P-). Determine surplus of a seller and buyer until and after tax introduction. Calculate the amount of tax revenues to budget. Estimate public losses from the tax introduction.

Exercise 2 (5 points) Cost 1000 tg Excise Duty 10% VAT 12% Selling price with VAT 4000 tg Wholeseller’s markup 10% Retailer’s markup 25% Find profit and retailing price. Also shw the structure of retailing price as a pie diagram.

Exercise 3 (3 points) A firm is producing cigarettes and acting in terms of monopolistic competition. The function of marginal revenue of firm is as MR = 10 -2 Q, and increasing part of long term marginal cost curve is LMC= 2 Q-2. If minimum meaning of long term average cost (LAC) is equal to 6, what is the surplus of production power for company?

Exercise 4 (3 points) • Two firms are acting in industry, and marginal cost of them is same and equal to zero. Demand of indusry’s product is P=100 -Q. Determine price and production volume, if there is free competition in industry. Determine price and volume of production, if companies are incorporated into cartel.

Exercise 5 (3 points) Two firms are acting in industry, they divide market equally. Demand on product of this industry is P= 400 – 2 Q. Marginal cost of firm is fixed and equal to 10. How many products are produced by each firm and what is the market price?