Answer questons - Assignment Example

Macro and Micro Economics Evaluating the equilibrium price and quantity pair of iPhones. Equilibrium level can be defined the point at which marginal product cost is equal to marginal product benefit. MPC=MPB Therefore 100 + Q =MPB. 100 + Q (500-p) = 5000 - 100p + 500Q-Qp Qp= = p= 5000-100P+500 P= 5500-100p P=54.45. Equilibrium price = 54.45. Equilibrium quantity = Q=5500-100p 5500-5445= 55 Q= 55. 2. (a) Finding the socially preferred price and quantity pair of iPhones. The preferred social price is the marginal social cost.

The marginal social cost is calculated as follows; MSC=Marginal private cost + Marginal external cost MSC= 100 + Q + marginal external cost. 100 + 3Q = 100 + Q + marginal external cost. 100 + 3Q= 100 + Q + 100 + zQ. 3Q= Q+zQ. Z= 2Q. The price is thus; 100 + 2Q. 100 + 2(54.45)= 208.9 The quantity is 100 + 3Q. 100 + 2Q= 100+3Q. 2/3 = 0.667( 55) = 36.685. 100 + 36.685 = 137. b). Marginal external cost is the difference of the marginal private cost from marginal socialcost. MSC = 100 + 3Q- 100 + Q = 2Q.

100 + 2Q = 100 + (55X2) = 210. The answer is got through subtracting marginal private cost from marginal social cost. The result was 100 + 2Q which when substituted with the value of Q gives 210. 3. a). What is Apple’s new MPC inclusive of the per‐unit tax? The previous MPC was 100 + Q + T. b). what value must the per‐unit tax take in order to align Apple’s private decisions with thesocially preferred outcome found in question (2)? Show and explain your answer. Apple’s socially preferred outcome is 208.9. The quantity is 137.

The overall cost of producing the iphones is 26,619.3. A 10% quota produces 23,957.37. in order to align its private decisions to the preferred outcome, apple will increase its price to 195 (Sengupta, pp. 67-78). 137x=26619.3 26619.3/137= 194.3 =195. 4. Through the Government imposing a quota there would be similar effects as the implementation of a per unit production tax. such that the quota was equivalent to the socially preferred quantity in question 2. The quota will result to marginal external costs which are just the same as in question two.

MSC = 100 + 3Q- 100 + Q = 2Q, 100 + 2Q = 100 + (55X2) = 210. 5. A). As the game moves to the last rounds, the average amount of candy gathered by per student increases sharply before it starts to fall again to a stable number. This is attributed to the uneven distribution of candy amongst the students at first hence the mean is stretched over a large distribution. Then when more students get the candies, the mean rises up significantly. B) The game is known as a probability diagram since one getting candies depends on several other factors. C) My ability to gather candies affected the ability of the others to gather candy as the more candies I gather the less they will have to gather. D) 1. A gathering limit per student will result in equal chances of distribution; hence the mean will be well distributed.

Candies will be equally distributed. 2. Formation of student groups that could split their total candy catch results in equal distribution of candy hence the mean is higher. 3. An increase in the initial stock of the candy increases the number of candy, but does not affect the mean. More candy means participants will have more candy. 4. An increase in the physical size of the room leads to equal distribution hence people tend to get less candy as they tend to cover little area. 5. An increase in the number of students in the course leads to each participant getting few candies unlike with few course participants. 6. Students will have less candies as a result of any of the two scenarios happening coincidentally.

Work Cited Sengupta, Keya. Price Formation Process in the Indian Economy. New Delhi: Mittal Publ, 2003. Print.