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Q3.3 Demand and Supply Curve for Tuna Fish

From the question, increased demand for Tuna Fish fueled by Americans, Europeans and Chinese who are switching to more healthy sources of protein causes a rightward shift in the demand curve. At the same time, in the labor market for fishermen, the increased number of vessels and fishermen represents a movement along the supply curve. This is primarily because a movement along the supply curve occurs when the price of the good changes and quantity supplied changes in line with the original supply relationship. If any of the factors affecting supply of vessels or labor market changed then the supply curve would shift either side (Arnold, 2013).

If people discover that tuna has heavy concentrations of mercury the fish labor market would suffer. Though price has been increasing due to healthy consciousness about tuna fish as a rich source of protein, this discovery would drastically lower the quantity demanded causing leftward shift in demand curve from D1 to D2. Thereby, the quantity demanded for the fish would lower because of deadly effects of mercury in food which also see price lower from p1 to p2. The supply curve would remain the same and quantity of labor and vessels supplied would move along the curve. If there is no remedy, the entire tuna market would collapse unless fishermen go fishing is safe waters where there are no contaminated fish.

Q 4.1: Price Ceiling in Argentina’s Electricity Market

With increase in demand for electricity in urban and rural areas with a price ceiling, it would put an upward pressure on price of electricity to increase and utility companies would require funds to expand their capacity to meet increasing demand (Q1) at lower and cheap prices (Po). Since there is an incentive to buy air conditioners to cool the houses, power blackouts would continue to increase more in urban areas than in rural areas. The difference arises because more urban centres are connected to power and residents have more disposable incomes to purchase air conditioners. In its worse form as inflation bites, utility companies would have to produce lower units of power at prevailing prices further increasing power blackouts. The supply curve would shift to the left resulting into lower units of power output (Q2) but because of the price ceiling the price remains the same instead of increasing as would have been the case under free market.

Q 4.5: Price of entrees/ dinner during recession and during economic boom

If the restaurant management is seeking less-price conscious clientele, it would therefore mean that during an economic boom, the target clients would have more disposable income and therefore willing to spend extra cash on the same quantity to enjoy a leisurely dinner at the restaurant. Likelihood of the management to increase prices under economic boom would depend on price elasticity of demand among the target customers. If the elasticity of demand is more that unity, then it would mean that a unit change in price would result into more than one unit change in quantity demanded. On the other hand, if elasticity is less that unitary, then a unit change in price would result into less than a unit change in quantity demanded (Landsburg, 2011).

Therefore, in this case because the assumption is that target clientele is less price sensitive, then it means that price elasticity of demand is less than unitary. As a result, if the management decides to increase prices during an economic boom, then a unit change (increase) in price would result in less than a unit change (reduction) in quantity demanded (or number of clients). The resultant effect is that total revenue would increase more than before the original status because change from P0 – P1> Q0 – Q1. This therefore would let the management to allow customers to eat a leisurely dinner because they will have covered their costs and accrue more revenue. In addition, the ambience that comes with the restaurant having fewer customers would attract more customers who are less price sensitive and will to pay extra penny to get the leisure.

Q 10.8: Television service

With satellite television technology it implies that news content can be broadcast from a central location to the rest of the world with minimal cost. Since more people will pay for the service, revenues will be more than cost implying that the marginal cost of production will be lower. In addition the fixed costs associated with acquisition and installation of services will be spread over several users resulting into lower average fixed cost (AFC). With lower average cost, marginal cost and average fixed cost the break-even point for US TV shows would definitely have to be lower.

Satellite technology unlike cable technology has lower costs in terms of acquisition and maintenance. With cable technology one has to lay cables and incur huge maintenance costs. With lower cost for satellite TV companies would have an incentive to go small but niche markets all over the US. The increased revenue streams from the numerous niche markets with limited cost would result into lower breakeven point.

Q18.14: Managing negative externalities efficiently.

Negative externality is the imposition of a cost to other parties not involved in the transaction or activities (Sexton, 2011). In this case, negative externality exists in that the method used to get rid of the skunk will result into noise making to the neighbors and the skunk will end up in a neighbor’s residence who will also incur a cost to remove the animal. If the neighbors don’t unite and engage the reluctant city government on how remove the skunk permanently out of the suburbs, the neighborhood would become noisy and smelly making less attractive.

Some of the efficient way in the short run to address the problem of negative externality is to negotiate with the pest control company to remove the skunk out of the suburb permanently and all the neighbors contribute to pay the firm for the service. This would ensure that neighbors don’t spend their nights under noisy radio and bright lights shining over their houses. In the long run, the neighbors can negotiate with city government to give subsidies or tax relief to companies that offer such services. This will help to lower the costs of dealing with negative externality and offer an incentive for the neighbors to continue engaging the pest control company in future.

Work cited

Arnold, Rogers. Micro-economics, 11th ed. Manson: South-Western Cengage Learning, 2013, Print.

Landsburg, Steven. Price Theory and Application, 8th ed. Manson. South-Western Cengage Learning, 2011, Print.

Sexton, Robert. Exploring Economics, 6th Ed. Manson: South-Western Cengage Learning, 2011, Print.