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Homework answers / question archive / 1)Why firm operates in the market adopting a marginal thinking(i

1)Why firm operates in the market adopting a marginal thinking(i

Economics

1)Why firm operates in the market adopting a marginal thinking(i.e. produce at MR=MC). Why do not they take a holistic thought for profit maximization?

2)Suppose an agent's marginal cost function (V'(E)) is given by V'(E)=(1/2)E, her production function is given by Q=3E and her contract is given by Y=15+0.2Q. (Thus, d=3 and b=0.2 in our notation)
e) If the commission rate (b) is increased to b=0.5, thus Y=10+ 0.5Q, does the agent's effort level where utility is maximized change? Explain f) If the fixed/base pay (a) is increased to a-20, thus Y-20 + 0.2Q, does the agent's effort level where utility is maximized change? Explain

3)

Incomes fall (apples is normal good)

a. Supply is affected

b. Demand is affected

c. Supply curve is shifted to _____

d. Demand curve is shifted to ______

e. Supply curve moves _____

f. Demand curve moves ______

g. Price (increases or decreases ___________ .

h. (Demand or Quantity Demanded) ______________ (increases or decreases)

Assume caramel and apples are complements and the price of sugar falls

                                                                         

a.   Supply is affected

b.   Demand is affected

c.   Supply curve is shifted to _____

d.   Demand curve is shifted to ______

e.   Supply curve moves _____

f.    Demand curve moves ______

g.   Price (increases or decreases ___________ .

h.   (Demand or Quantity Demanded) ______________ (increases or decreases)

Wages of apple pickers rise.

a.   Supply is affected

b.   Demand is affected

c.   Supply curve is shifted to _____

d.   Demand curve is shifted to ______

e.   Supply curve moves _____

f.    Demand curve moves ______

g.   Price (increases or decreases ___________ .

h.   (Demand or Quantity Demanded) ______________ (increases or decreases)

The profitability of grapes (an alternate good producers could produce) increases and at the same time consumers expect the price of apples to fall in the future

  1. Supply is affected
  2. Demand is affected
  3. Supply curve is shifted to _____
  4. Demand curve is shifted to ______
  5. Supply curve moves _____
  6. Demand curve moves ______
  7. Price (increases or decreases ___________ .
  8. (Demand or Quantity Demanded) ______________ (increases or decreases)

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