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Instruction: Please answer ALL questions. All questions carry equal marks. Please do not write over 2000 words for the entire assignment.

1. a. Using the graph shown, analyze the effect a $300 price ceiling would have on the market for ten-speed bicycles. Would this be a binding price ceiling?

b. Using the graph shown, analyze the effect a $700 price floor would have on this market for ten-speed bicycles. Would this be a binding price floor?

c. Why would policymakers choose to impose a price ceiling or price floor?

830_graph.jpg

2. Bob Edwards owns a business. Bob hires an economist who assesses the shape of the business's average total cost (ATC) curve as a function of the number of units produced. The results indicate a U-shaped average total cost curve. Bob's economist explains what makes the ATC U-shaped. Explain the reasons as to why ATC is U-shaped. You are required to use practical reasons related to any business that you are familiar with in explanations.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92087632
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