Part A 

Suppose the market for endangered wild animal sanctuary has only two consumers, Smith and Jones, whose demand curves are depicted below:

a. Graph the market demand curve for this market (label the graph appropriately)

b.  Using only the market demand curve derive the total consumer surplus in the animal sanctuary market if tickets sell for $30 each. Please DO NOT use a graph/graph-paper to obtain the answer manually.

Part B (6 points): 

Smith and Jones also love to listen to broadcasts of recorded opera. They have the following private benefit curves for Brisbane Public Radio broadcasts of recorded opera on Saturdays:

Smith: PS = 15 – Q

Jones: PJ = 12 – 2Q,

where PS and PJ represent marginal willingness-to-pay values for Smith and Jones, respectively, and Q represents the number of hours of opera broadcast each Saturday. 

c. If Smith and Jones are the only public radio listeners in Brisbane, construct the total demand for opera broadcasts. Draw the appropriately labelled diagram.

d. If the marginal cost of opera broadcasts is $15 per hour, what is the socially optimal number of hours of broadcast opera? Show the socially optimal equilibrium in your diagram.

Q.2  This question has two independent parts – Part A and Part B. Answer both parts.

Part A  

Below are some data for a Imagiland. What is the GDP of Imagiland? Explain your calculation.

Part B 

Delta Inc. produces 80 computer hard drives and sells them for $500 each to High-tech Computers. Using hard drives and other factor inputs, High-tech Computers produces 80 laptops. High-tech Computers sells the laptops, with installed software that High-tech Computers licenses from Megasoft at $50 per computer, to JaybeeHiFi for $900 each. JaybeeHiFi sells the laptops to the customers for $1,000 each.

a.  Calculate the total contribution to GDP using the value added method. 

b. Check if you obtain the GDP figure by expenditure method.

Q.3  Charlie’s Car Cleaning is one firm in a perfectly competitive car-wash industry in Brisbane. What is likely to happen to the equilibrium prices and output in the car-wash industry and Charlie’s profits in the short run and the long run if the Brisbane Council raised water prices? Assume the car wash industry has constant costs (i.e., cost of production in the industry does not change with number of firms). 

Explain your answer. Your explanation must include, but not be limited to, the appropriate graphs.

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