kellychu977
New member
- Joined
- Oct 6, 2010
- Messages
- 1
Hi Guys,
I've just got some homework questions I'm really having trouble with, if you could take a look and offer any advise at all I would be so grateful!
Thanks everyone!
Here's the questions:
The Blu-Ray video disk copying industry is perfectly competitive. Each firm can copy five Blu-Ray discs per day at an average cost of $10 per disk. Firms must pay a royalty to film studios and the per-film royalty rate (r) is an increasing function of total industry output (Q), given by r = 0.002Q .
a. Graph the royalty “supply” curve with r as a function of Q.
b. The daily demand for copied Blu-Ray videos is given by Q = 1,050 – 50P. Assuming the industry is in long-run equilibrium, what are the equilibrium price and quantity of copied Blu-ray discs? How many Blu-Ray disk firms are there? What is the per-film royalty rate? Suppose that the demand for copied Blu-Ray discs increases to Q =1,600 – 50P. Now, what are the long-run equilibrium price and quantity for copied Blu-Ray discs? How many Blu-Ray firms are there? What is the per-film royalty rate?
c. Graph these long-run equilibria in the DVD market and calculate the increase in producer surplus between the situations described in part b and part c.
d. Use the royalty supply curve graphed in part a to show that the increase in producer surplus is precisely equal to the increase in royalties paid as Q expands incrementally from its level in part b to its level in part c.
e. Suppose that the government institutes a $5.50 per film tax on DVD-copying industry. Assuming that the demand for copied films is that given in part c, how does this tax affect the market equilibrium?
f. How is the burden of this tax allocated between consumers and producers? What is the loss of consumer and producer surplus?
g. Show that the loss of producer surplus as a result of this tax is borne completely by the film studios. Explain your results intuitively.
Again, any help would be much, much appreciated.
Thanks again,
Kelly
I've just got some homework questions I'm really having trouble with, if you could take a look and offer any advise at all I would be so grateful!
Thanks everyone!
Here's the questions:
The Blu-Ray video disk copying industry is perfectly competitive. Each firm can copy five Blu-Ray discs per day at an average cost of $10 per disk. Firms must pay a royalty to film studios and the per-film royalty rate (r) is an increasing function of total industry output (Q), given by r = 0.002Q .
a. Graph the royalty “supply” curve with r as a function of Q.
b. The daily demand for copied Blu-Ray videos is given by Q = 1,050 – 50P. Assuming the industry is in long-run equilibrium, what are the equilibrium price and quantity of copied Blu-ray discs? How many Blu-Ray disk firms are there? What is the per-film royalty rate? Suppose that the demand for copied Blu-Ray discs increases to Q =1,600 – 50P. Now, what are the long-run equilibrium price and quantity for copied Blu-Ray discs? How many Blu-Ray firms are there? What is the per-film royalty rate?
c. Graph these long-run equilibria in the DVD market and calculate the increase in producer surplus between the situations described in part b and part c.
d. Use the royalty supply curve graphed in part a to show that the increase in producer surplus is precisely equal to the increase in royalties paid as Q expands incrementally from its level in part b to its level in part c.
e. Suppose that the government institutes a $5.50 per film tax on DVD-copying industry. Assuming that the demand for copied films is that given in part c, how does this tax affect the market equilibrium?
f. How is the burden of this tax allocated between consumers and producers? What is the loss of consumer and producer surplus?
g. Show that the loss of producer surplus as a result of this tax is borne completely by the film studios. Explain your results intuitively.
Again, any help would be much, much appreciated.
Thanks again,
Kelly