Answer questions Assignment Example | Topics and Well Written Essays - 2500 words

Answer questions - Assignment Example Primal solution is easier to solve and because of the difficulty of the dual solution, there is a lack of full numerical solutions to the dual problem. Normal or direct utility function treats utility as increasing function of goods or services consumed and decrease in the function of work being performed for it. As opposite to this, in indirect utility function increasing function of non-work income and rate of wage of work done, and decreasing function of prices of goods and services consumed is termed as utility. As the price of chips in Utopia is more than the price in the world, many suppliers will be interested in providing the product in Utopia. With the existing demand and supply situation, it appears that production will mostly be done outside Utopia. Domestic production will be costly and thus not affordable. b) If the senator’s proposal is approved, there will be an increase in supply due to decreased cost, and will be an increase in demand as well. With the increased number of chips coming in market, the price will automatically decrease for the end buyer. The price will be thus down to less than 4. The quantity consumed domestically will increase so will the quantity produced domestically. The subsidy plan will cost the government a lot. It will not be a very profitable venture as all profits made through this economic strategy will be lost to the factor that imports are still allowed and subsidy is not paid on domestic sales. With the high price of chips in Utopia, even with the subsidy, Utopia will not be the cheapest producer to beat competition to the level where despite the imports and no subsidy on domestic sales this step could be profitable. d) The Senator is correct in his objections. Considering the market price and the demand of this product, an increase of $1 tariff on imports would have resulted in the same profit collection with much less hassle. d) The maximum profit equation has been derived through a set of