Economics of Enterprise Answers

As economic/business consultant to the dominant firm in a particular market, you have discovered that, at the current price and output, demand for your customers’ product is price inelastic. What advice regarding pricing would you give to management? Explain.

What is the economic rationale of 'Minimum Support Price' in Indian agriculture? Explain in not more than 400 words.

John is contemplating on whether to go for a project that will give 100,000 each year for four years or a project that will give 75000 each year for six years. Advise him if the discount rate is 10%

Q.3

Consider public policy aimed at smoking.

a. Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $2 and the government wants to reduce smoking by 20 percent, by how much should it increase the price? 

b. If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking one year from now or five years from now? 

c. Studies also find that teenagers have a higher price elasticity of demand than do adults. Why might this be true?

A man borrows 10,000 from a loan firm. the rate of simple interest is 15% but the interest is to be deducted from the loan at the time the money is borrowed. at the end of one year he has to pay back 10000. what is the actual rate of interest ?

what is a perfectly competitive market

Consider the case in which the items are delivered at a constant rate e and the demand arrives at a constant rate d. For given d and changing c, when the ratio of Q/I reaches the maximum, and when does it reach the minimum? If you have the option to control c, do you want this ratio to reach the maximum or the minimum? Explain why?

Consider the following demand function: QD = 25/P2. Show that the point elasticity of demand for that function is always equal to −2.

what will happen to the demand for skilled labor if the price of unskilled labor increases?

the demand curve faced by a Monopolist is p= 120-3Q.the marginal cost curve in factory 1and factory 2 are respectively as follows MC1=10+20Q1 MC2=60+5Q2 what is the equilibrium price