Show calculation or a brief explanation to get partial score. (8 points) The following table...

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Show calculation or a brief explanation to get partial score.

(8 points) The following table presents the demand and supply schedules for apartments in a small rural city in Japan:

(3 points) If the monthly rental rate is \67,800, in what condition will the market be, excess supply or excess demand? How many apartments per month will be in excess? What will be expected to occur to rental rates?
(3 points) If the monthly rental rate is \39,550, in what condition will the market be, excess supply or excess demand? How many apartments per month will be in excess? What will be expected to occur to rental rates?
(1 point) How much is the equilibrium or market clearing rental rate per month?
(1 point) How many is the equilibrium number of apartments per month rented?

Answers:

(8 points) In problem 1 above, suppose that the city council decides rents are too high and imposes a rent ceiling of \45,200.
1. (3 points) What does the ceiling on rents cause apartments per month?
2. (2 points) How many more renters would have found an apartment in this city if ceiling had not been imposed?

Suppose that instead of imposing a ceiling price, the city council places a floor price of \67,800 on rental rates.

(3 points) What does the floor price on rent cause apartments per month?

Answers:

(9 points) The figure below shows market demand and supply curves in a perfectly competitive market.

(1 point) Which of the following figure depicts the demand facing a perfectly competitive firm selling in this market?

(i)

(ii)

(iii)

(iv)

(4 points) What is the firm’s demand elasticity at 200 units of output? At 400 units?
(4 points) What is the firm’s marginal revenue from selling the 200th unit of output? From the 400th unit?

Answers:

(24 points) Assume a monopoly has the following demand schedule:

(4 points) Calculate total revenue at each price and quantity combination.
(6 points) Calculate marginal revenue per unit for each decrease in price.
(7 points) For the change in price from $20 to $15, is demand elastic or inelastic? How much revenue does the firm lose from reducing the price on the 200 units it could have sold for $20? How much revenue does the firm gain from selling 100 more units at $15? Compare the two changes; then compare these changes with MR.
(7 points) Answer part c for the price change from $15 to $10.

Answers:

005_wmhsazo-mdlexgcp.docx

David · Accepted Answer

ANSWER 1 
a. If the monthly rental rate is 67,800, there will be EXCESS SUPPLY. (as supply exceeds demand) 
There will be 15000 apartments excess (Computed as 70000 – 55000).Due to excess supply, 
the rental rates will fall. 
b. If the monthly rental rate is 39,550, there will be EXCESS DEMAND. (as demand exceeds 
supply) 
There will be 78000 apartments excess(Computed as 115000-37000).Due to excess demand, 
the rental rates will rise. 
c. The equilibrium rental represents the rental at which demand equals supply. In the given table 
demand equals supply when rentals are 62150.  
d. The number of equilibrium apartments shall be 60000.
ANSWER 2. 
a. If the ceiling is set at 45200, it implies that rental price cannot be set in excess of 45200. At the 
level of 45200,

Show calculation or a brief explanation to get partial score. (8 points) The following table presents the demand and supply schedules for apartments in a small rural city in Japan: (3 points) If the...

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