# Microeconomics Assignment

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Chew Pansies uses a first-come, first-send because the iris person to call to make a reservation ATA particular time is allocated the table at that time. Mandarin Dynasty uses a combination of the immediate first-come, first serve system and the reservation based first-come, first-serve system. B. Why do you think restaurants have different reservations policies? The speed with which tables turn over at the different restaurants probably is quite different and the customers probably have quite different values of time.

Chew Pansies has a low turnover rate-??only 1 or 2 groups of customers can use a table each night-??and its customers have a high value of time. If Chew Pansies refused to take reservations, its customers would need to wait inefficiently long time and would go elsewhere so that Chew Pannier’s profits would be lower. At Eli Cannon’s, the tables have a high turnover rate and the customers have a lower value of time. Allowing reservations would be costly for Eli Cannon’s and would spare its customers only a slight wait at most so that allowing reservations would decrease Eli Cannon’s profits.

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At Mandarin Dynasty, the turnover rate of the tables is between that at Chew Pansies and Eli Cannon’s, so it uses a combination of hone reservation first-come, first-serve and appear in person first-come, first serve. C. Why might each restaurant be using an efficient allocation method? Each restaurant is using a different allocation method because of the relative costs. Each uses the method that has the lowest cost for the restaurant. D. Why do you think restaurants don’t use the market price to allocate their tables?

Market allocation requires that customers pay for a table and the price would fluctuate from one hour to the next depending on the number of customers who arrive. Customers would be highly uncertain about the price they would need to pay and such uncertainty decreases the demand for meals from the restaurant. The decreased demand lowers the restaurant’s profit. 2. The table provides Price Quantity demanded information on the (dollars (miles) demand schedules per mile) Ann Beth icy for train travel 3 30 25 20 for Ann, Beth, and Icy, who are the only buyers in the market. A.

Construct the 8 5 market demand 9 schedule. The market demand schedule shows the sum of the quantities demanded by Ann, Beth, and Icy at each price. When the price is \$3 per mile, the market quantity demanded is 75; when the price is \$4 per mile, the market quantity emended is 60; when the price is \$5 per mile, the marker quantity demanded is 45; when the price is \$6 per mile, the market quantity demanded is 30; when the price is \$7 per mile, the market quantity demanded is 15; when the price is \$8 per mile, the market quantity demanded is 5; and when the price is \$9 per miler the market quantity demanded is O. . What are the maximum prices that Ann, Beth, and Icy are willing to pay to travel 20 miles? Why? Each person’s demand schedule shows the maximum price that person is willing to pay to travel 20 miles. The maximum price Ann is willing to pay to ravel 20 miles is \$5, the maximum price Beth is willing to pay is \$4, and the maximum price Icy is willing to pay is \$3. C. What is the marginal social benefit when the total distance traveled is 60 miles? The marginal social benefit when the quantity is 60 miles is \$4 per mile.

The marginal social benefit is determined from the consumers’ demands and equals the maximum price that consumers will pay for the quantity. The demand schedule shows that the maximum price consumers will pay for 60 miles is \$4 per mile and this price equals the marginal social benefit. D. What is the marginal benefit for each person when they travel a total stance of 60 miles and how many miles does each of the people travel? The three travel a total distance of 60 miles when the price is \$4 a mile. Each person’s marginal benefit is \$4 per mile.

At this price Ann travels 25 miles, Beth travels 20 miles, and Castrates 15 miles. E. What is each traveler’s consumer surplus when the price is \$4 a mile? Ann.’s consumer surplus is \$62. 50; Beet’s consumer surplus is 540. 00; and, Sys consumer surplus is \$22. 50. When the price is \$4 per mile, Ann buys 25 miles. Ann.’s consumer surplus is the triangular area under her demand curve and above the price. The demand curve is linear, so Ann.’s consumer surplus is 1/2 x (\$9 – \$4) x 25, which equals \$62. 50. When the price is \$4 per mile, Beth buys 20 miles.

Beet’s consumer surplus is demand curve is linear, so Beet’s consumer surplus is 1/2 x (\$8 -?? \$4) x 20, which equals \$40. 00 When the price is \$4 per mile, Icy buys 15 miles. Sys consumer surplus is the triangular area under his demand curve and above the price. The demand curve is linear, so Sys consumer surplus is 1/2 x (\$7 – \$4) x 15, which equals \$22. 50. F. What is the market consumer surplus when the price is \$4 a mile? The market consumer surplus is the sum of Ann.’s consumer surplus, Beet’s consumer surplus, and Sys consumer surplus, or \$125. 00. 3. Bay Saves Billions for Bidders If you think you would save money by bidding on eBay auctions, you would likely be right. Two associate professors calculate the difference between the actual purchase price paid for auction items and the top price bidders stated they were willing to pay and the Maryland researchers found it averaged at least 54 per auction. Informational, January 28, 2008 a. What method is used to allocate goods on eBay? EBay is using market price to allocate the goods. The market price is the price established in the auction. If someone is willing and able to pay that price, the person will get the item. . How do eBay auctions influence consumer surplus? For the vast majority Of auctions the winning bidder will enjoy a consumer surplus so eBay increases consumer surplus. For instance, if there are bidders on a unique item, the winning bidder-??who sets the price for the good-??will pay a price that is equal to the value of the item to the bidder with the second-highest valuation plus the minimum bid increment. The winning bidder has some consumer surplus as long as his or re value of the good exceeds the price that must be paid, which will almost always be the case.

Indeed, a person chooses to buy on eBay rather than elsewhere if the person believes that his or her consumer surplus is largest by purchasing on eBay. 4. The table provides information on the supply schedules of hot air balloon rides by Xavier, Yakima, and Sack, who are the only sellers in the market. A. Construct the market us apply Quantity supplied (rides per week) per Xavier Yakima Sack 100 ride) 90 15 The market 80 10 supply 70 Schedule shows the 50 sum of the quantities s supplied by Xavier, Yakima, and Sack at each price.

When the price is \$100 per ride, the market quantity supplied is 75 rides; when the price is \$90 per ride, the market quantity supplied is 60 rides; when the price is \$80 per ride, the marker quantity supplied is 45 rides; when the price is \$70 per ride, the market quantity supplied is 30 rides; when the price is \$60 per ride, the market quantity supplied is 15 rides; when the price is \$50 per ride, the market quantity supplied is 5 rides; and when the price is \$40 per ride, the market quantity supplied is O rides. B. What are the minimum prices that Xavier, Yakima, and Sack are willing to accept to supply 20 rides? Why?

The minimum supply-price equals the lowest price at which a producer is willing to produce the given quantity. The supply schedule tells us the minimum supply-price. Xavier minimum supply-price for 20 rides is \$80; Yashmak’s minimum supply-price is \$90; and, Sack’s minimum supply-price is \$100. C. What is the marginal social cost when the total number of rides is 30? The quantity of rides is supplied is 30 when the price is \$70 per ride. The marginal social cost of any quantity is equal to the price for which that quantity will be supplied, so when the total number of rides is 30, the marginal social cost equals \$70 per ride. What is the marginal cost for each supplier when the total number of rides is 30 and how many rides does each of the firms supply? When the total number of rides is 30, Xavier supplies 15 rides, Yakima supplies 10 rides, and Sack supplies 5 rides. The marginal cost for each firm is \$70. E. What is each firm’s producer surplus when the price is \$70 a ride? Saver’s producer surplus is \$225; Yashmak’s producer surplus is \$1 00; and, Sack’s producer surplus is \$25. When the price is \$70 per ride, Xavier supplies 15 rides. Saver’s producer surplus is the triangular area under the price and above his supply curve.

The supply curve is linear, so Xavier producer surplus is 1/2 x (\$70 -?? \$40) x 15, which equals \$225. When the price is \$70 per ride, Yakima supplies ID rides. Yashmak’s producer surplus is the triangular area under the price and above his supply curve. The supply curve is linear, so Yashmak’s producer surplus is 1/2 x (\$70 – \$50) x 10, which equals \$100. When the price is \$70 per ride, Sack supplies 5 rides. Sack’s producer surplus is the triangular area under the price and above his supply curve. The supply curve is linear, so Sack’s producer surplus is 1/2 x (\$70 -?? \$60) x 5, which equals \$25. . What is the market producer surplus when the price is \$70 a ride? The market producer surplus is equal to the sum of Saver’s producer surplus plus Yashmak’s producer surplus plus Sack’s producer surplus, which is \$225 + \$100 + \$25 or \$350. 5. Based on the information provided in the news clip in problem 3, a. Can an eBay auction give the seller a surplus? Yes, an eBay auction can give a seller a surplus. The seller has a minimum supply price for which the item will be sold. If the price established in the auction exceeds that minimum supply price, the seller has a surplus.

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