MAE101 - Economic Principles, Production, Possibility Frontier (PPF), Comparative Advantage, Monopoly, Bob & Mary Trade Case Study - Economics Assignment Help

Assignment Task

Question 1
Assume that Bob can either type 6 pages per hour or bake 2 cakes. His wife Mary can type 12 pages per hour or bake 4 cakes. 

a-Draw the Production Possibility Frontier (PPF) for each person and calculate the comparative advantage of each person in the above example.
b-Following from part (a), do you think that complete specialization is possible? Explain. Will there be any trade between Bob and Mary? 
c-Let Bob updates his skills. Now he can either type 6 pages per hour or bake 4 cakes. His wife types 12 pages per hour or bakes 4 cakes (as before). Calculate the comparative advantage of each person in this case and show the gain from trade between Bob and Mary. 

Question 2
The following Table 1 refers to five possible buyers’ willingness to pay for good Z.

(a)Let the market price under perfect competition is $3.00, calculate the total consumer surplus in the market.
(b)Assuming that the seller of good Z is a monopolist, and he knows each person’s willingness to pay. Further a seller incurs a marginal cost, that is, 3 ($) per unit which remains constant. If each person has a unit demand and a monopolist decides to discriminate the price (in particular, the first-degree price discrimination) what will be the consumer and producer surpluses?

Question 3
Assume that a firm in a perfectly competitive market can sell its product for $35 (i.e. price per unit of output). Furthermore, it faces the following costs as shown in Table a--Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC), and Average Cost (AC).

a-What is the profit-maximizing output level? Is this firm is making a profit or loss at a profit-maximizing output level? Explain.
b-Do you think the firm will continue its production in the short run?
c-What will be the long-run price in this market?

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