MICROECONOMICS BESANKO 4TH EDITION PDF

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Microeconomics / David Besanko, Ronald Braeutigam. —4th ed. p. cm. DAVID BESANKO is the Alvin J. Huss Distinguished Professor of. aging, and supporting us throughout this fourth edition. Library of Congress Cataloging-in-Publication Data Besanko, David, Microeconomics / David Besanko, Ronald Braeutigam. —4th ed. p. cm. Includes .


Microeconomics Besanko 4th Edition Pdf

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The constraints place limitations on the choice the decision maker can select and defines the set of alternatives from which the best will be chosen. Why would a higher price e. Why would a lower price e. If the price in the market was above the equilibrium price, consumers would be willing to download fewer units than suppliers would be willing to sell, creating an excess supply.

By definition, equilibrium is a state that will remain unchanged as long as exogenous factors remain unchanged. Since in this case suppliers will lower their price, this high price cannot be an equilibrium. When the price is below the equilibrium price, consumers will demand more units than suppliers have made available. This excess demand will entice consumers to bid up the prices to download the limited units available.

Since the price will change, it cannot be an equilibrium. What is the difference between an exogenous variable and an endogenous variable in an economic model? Would it ever be useful to construct a model that contained only exogenous variables and no endogenous variables? Exogenous variables are taken as given in an economic model, i. An economic model that contained no endogenous variables would not be very interesting.

With no endogenous variables, nothing would be determined by the model so it would not serve much purpose. Why do economists do comparative statics analysis? What role do endogenous variables and exogenous variables play in comparative statics analysis? Comparative statics analyses are performed to determine how the levels of endogenous variables change as some exogenous variable is changed.

This type of analysis is very important since in the real world the exogenous variables, such as weather, policy tools, etc.

An example of comparative statics analysis would be asking the question: If extraordinarily low rainfall an exogenous variable causes a 30 percent reduction in corn supply, by how much will the market price for corn an endogenous variable increase?

What is the difference between positive and normative analysis? Which of the following questions would entail positive analysis, and which normative analysis? Positive analysis attempts to explain how an economic system works or to predict how it will change over time by asking explanatory or predictive questions.

What is the difference between positive and normative analysis? Which of the following questions would entail positive analysis, and which normative analysis? Positive analysis attempts to explain how an economic system works or to predict how it will change over time by asking explanatory or predictive questions.

Normative analysis focuses on what should be done by asking prescriptive questions. Because this question asks whether dealership profits will go up or down and by how much but refrains from inquiring as to whether this would be a good thing it is an example of positive analysis.

On the other hand, this question asks whether it is desirable to impose taxes on Internet sales, so it is normative analysis. Notably, this question does not ask what the effect of such taxes would be. Solutions to Problems 1. Since supply and demand curves are always shifting, markets never actually reach an equilibrium. Therefore, the concept of equilibrium is useless. While the claim that markets never reach an equilibrium is probably debatable, even if markets do not ever reach equilibrium, the concept is still of central importance.

The concept of equilibrium is important because it provides a simple way to predict how market prices and quantities will change as exogenous variables change. Thus, while we may never reach a particular equilibrium price, say because a supply or demand schedule shifts as the market moves toward equilibrium, we can predict with relative ease, for example, whether prices will be rising or falling when exogenous market factors change as we move toward equilibrium.

As exogenous variables continue to change we can continue predict the direction of change for the endogenous variables, and this is not useless. For each of the following scenarios, illustrate graphically how the exogenous event described will contribute to a higher price of corn in the U. Department of Agriculture announces that exports of corn to Taiwan and Japan were surprisingly bullish, around 30 percent higher than had been expected.

See the article by Aaron Lucchetti, August 22, , p.

Assume that an increase in national. Surprisingly high export sales mean that the demand for corn was higher than expected, at D2 rather than D1.

D Q production outside the U.

Assuming the U. El Nino would, however, cause demand for U. Suppose that the global market for oil can be described by an upward-sloping supply curve and a downward-sloping demand curve. For each of the following scenarios, illustrate graphically how the exogenous event contributed to a rise or a decline in the price of oil in A booming economy in China raised the global demand for oil to record levels in As a result of the financial crisis of , the U. Reduced sectarian violence in Iraq in enabled Iraq to increase its oil production capacity.

Booming economy in China shifts the demand curve for oil rightward from D0 to D1 below , contributing to an increase in the price of oil. Recession in the U. Increase in oil production capacity in Iraq shifts the supply for oil rightward from S0 to S1 below , contributing to a decrease in the price of oil.

Booming economy in China S0. When it uses E machine-hours of equipment and hires L person-hours of labor, it can provide up to Q units of telephone service. The relationship between Q, E, and L is as follows: The firm must always pay PE for each machine-hour of equipment it uses and PL for each person-hour of labor it hires. Which are endogenous? By contrast, the exogenous variables are Q, PE, and PL because the production manager has no control over their values and must take them as given.

Assume that an increase in the price of electricity shifts the supply curve for aluminum to the left i. The demand for aluminum in the United States depends on the price of aluminum and income shifts the demand curve for aluminum to the right i. In , national income in the United States increased, while the price of electricity fell, as compared to How would the equilibrium price of aluminum in compare to the equilibrium price in ?

How would the equilibrium quantity in compare to the equilibrium quantity in ? In , the initial equilibrium is at price P1 and quantity Q1. As national income increased, demand for aluminum shifted to the right, as depicted in the graph below by the shift from D1 to D2.

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The fall in the price of electricity shifted the supply curve to the right, from S1 to S2. Both shifts have the effect of increasing the equilibrium quantity, from Q1 to Q2.

However, it is unclear whether price will rise or fall if the demand shift dominates, price would rise; if the supply shift dominates, price would fall. The quantity of ethanol motor fuel that is demanded depends on the price of ethanol and the price of gasoline. Because ethanol fuel is a substitute for gasoline, an increase in the price of gasoline shifts the demand curve for ethanol rightward. The quantity of ethanol supplied depends on the price of ethanol and the price of corn since the primary input used to produce ethanol in the U.

An increase in the price of corn shifts the supply curve of ethanol leftward. In the first half of , the price of gasoline in the U. How would the equilibrium price of ethanol motor fuel in the first half of compare to the price in ? The increase in the price of gasoline shifted the demand curve for ethanol rightward from D0 to D1 , while the increase in the price of corn shifted the supply curve for ethanol leftward from S0 to S1 below.

Both changes had the impact of increasing the price of ethanol, moving the equilibrium from E0 in to E1 in The impact of these changes on quantity is, in principle, ambiguous; the equilibrium quantity could either go up or down depending on the magnitude of the shifts in the demand and supply curves.

Microeconomics Sln Ch 1 - Besanko, 4th edition.pdf

The picture below shows the case in which there is a positive change in the equilibrium quantity. Price of ethanol S1 E1. Gasoline is supplied by oil companies that sell it on several markets. Hence the supply of gasoline in the United States depends on the price of gasoline in the United States and its price on other markets.

When the price of gasoline outside the United States increases, the U. How would an increase in the price of gasoline abroad affect the equilibrium price of gasoline in the United States? When the price of gasoline abroad goes up, the supply on the domestic market decreases. Firms are willing to supply less gasoline for the same price as before.

At that price the domestic demand exceeds the supply and therefore the equilibrium price in the US has to increase.

When this is followed by increase in the demand consumers are willing to download more gasoline then before supply would again be smaller than the demand. Hence the equilibrium price of the gasoline would increase even more.

In both equations P denotes the market price. Fill in the following table. For what price is the market in equilibriumsupply equals to the demand?

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For what price is the market in equilibrium supply equals demand? What is the equilibrium quantity? P 50 d Q Qs As shown in the table below, the equilibrium price is , and the equilibrium quantity is P Qd Qs. Fill in the following table and find the equilibrium price. How is the equilibrium price going to change compared with the scenario described in problem 1. Explain and then fill in the following table to verify your explanation.

P 80 90 Qd Qs When the demand increases, more people are willing to download sunglasses at the equilibrium price. Hence, the supply is insufficient to satisfy the demand and the equilibrium price has to go up.

Micro Chapter 3.pdf - Besanko Braeutigam Microeconomics 4th

The table below confirms this. Assume I is an exogenous variable.

Graph the supply and demand relationships, and indicate the equilibrium levels of price and quantity on your graph. Graphing these yields:. Because sellers will not be able to sell all of their wool at this price, they will need to reduce price to attract downloaders. At the lower price, the suppliers will offer a lower quantity of output for sale, and consumers will want to download more. downloaders will begin to bid up the price of wool until the new equilibrium is reached.

At the higher price, the suppliers will offer a higher quantity of output for sale, and consumers will want to download less. The other officers of your hall will tell you how many videos they would like to rent during the year.

Your job is to find the least expensive way of renting the required number of videos. After researching the options, you have found that there are three rental plans from which you can choose. Plan A: Plan B: Join the Frequent Viewer Club.

Plan C: Join the Very Frequent Viewer Club. Are total expenditures on videos endogenous or exogenous? Formulate each plan as a function of V, the number of videos to rent. In this case, the number of videos rented is exogenous because we are choosing a plan given a fixed level of videos. Because you may choose the plan, the plans are endogenous. Note, though, that the details of the individual plans are exogenous. Because you may choose the plan and the plans imply a total cost given a fixed level of videos, you are implicitly choosing the level of total expenditure.

Total expenditures are therefore endogenous. Suppose the officers of your residence hall give you a specified amount of money to spend, and want you to maximize the number of videos you can rent with that budget. You can choose from the same three plans A, B, and C available in Problem 1.

Now formulate each plan as a function of TC , the level of total expenditure on videos. With plan A you could rent 41 movies, with plan B you could rent 37 movies, and with plan C you would not be able to rent any movies because the membership fee exceeds your total budget. Now plan C offers the opportunity to rent the most videos. The number of videos rented depends on the choice of plan. The number of videos rented is endogenous, then, since you can choose the plan.

What is the difference between microeconomics and macroeconomics?

As before, because you may choose any of the three plans, this choice is endogenous. In this problem total expenditure is exogenous because we are choosing a plan given some fixed video rental budget.One way is to sketch a few more indifference curves each corresponding to a different level of utility.

StoneCold Alex Mochan. Republic of the Phils. An example of comparative statics analysis would be asking the question: If extraordinarily low rainfall an exogenous variable causes a 30 percent reduction in corn supply, by how much will the market price for corn an endogenous variable increase?

Thus, if Darrell chooses Plan A his optimal basket could be anywhere between J and L, including either of these points.

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