The following is the demand data on the brewery you manage, Neo-Classical Keynes

Question

The following is the demand data on the brewery you manage, Neo-Classical Keynesian Imperial Brews.You have collected data on:

quantity – the number of pints your brewery pours monthly, price – the price you charge per pint,population – the surrounding population of the town your brewery is in (measured in thousands), wine price – the price of wine sold by Adam Smith’s Invisible Hand Winery, wine quantity – the number of bottles of wine poured at Adam Smith, regional income – an index of regional income (measured in units, higher index means higher income), pretzel price – the price of the pretzels that you sell, pretzel quantity – the number of pretzels that you sell, TV price – the price of 60-inch TV’s.

434.49

Explain how each of the following events will affect the average and marginal cost curves of a Keynesian Brews:

i) An increase in labor costs

ii) An increase in lease payments for the brewery

iii) A decrease in the cost of utilities (electricity, water heat)

iv) Stricter environmental regulation requiring installation of filters on wastewater

quantity price population Wine price wine quantity regional income Pretzel price Pretzel quantity TV price 582.39 5.52 65.000 5.88 325.39 100.00 6.47 419.82 419.82 647.71 4.62 65.423 5.05 353.85 100.20 4.53 483.11 483.11 630.73 4.55 65.670 6.34 311.90 100.33 6.17 460.68 460.68 530.46 5.44 65.627 4.36 366.31 100.35 7.94 410.21 410.21 591.69 5.38 65.836 4.45 376.58 100.22 6.75 438.68 438.68 571.22 4.55 66.174 5.09 358.37 100.12 5.98 456.03 456.03 592.02 4.94 66.344 5.09 346.20 100.51 6.51 437.19 437.19 594.98 5.43 66.691 5.33 353.71 100.35 5.64 455.07 455.07 647.15 4.10 67.207 4.89 355.77 100.70 6.41 436.45 436.45 545.97 5.17 67.164 3.82 370.89 101.03 7.22 414.50 414.5 611.25 4.26 66.485 5.06 339.31 100.75 6.74 427.98 427.98 627.39 3.86 66.306 5.35 337.27 101.04 6.69 418.57 418.57 650.20 3.38 66.715 3.65 400.13 101.05 6.10 454.61 454.61 581.59 4.37 66.523 4.55 371.08 101.21 8.82 389.18 389.18 600.35 4.65 66.666 4.71 374.34 101.31 5.79 458.25 458.25 602.40 4.60 67.138 4.97 358.17 101.48 8.35 390.42 390.42 556.38 6.24 67.231 5.61 325.13 101.45 7.61 408.74 408.74 569.91 4.83 67.397 4.34 376.20 101.32 5.12 476.67 476.67 552.82 5.40 67.620 3.50 393.80 101.67 9.68 367.18 367.18 596.04 4.98 67.802 5.19 343.57 101.68 7.65 420.94 420.94 579.05 5.13 67.901 5.05 344.08 101.98 7.66 421.70 421.7 607.55 4.33 67.766 4.06 377.28 102.01 7.29 425.85 425.85 547.34 4.76 68.190 4.72 365.04 102.14 8.36 377.16 377.16 550.19 5.67 68.015 4.77 372.58 102.23 7.50 421.82 421.82 594.48 4.58 68.024 4.27 384.29 102.30 6.10 451.82 451.82 612.38 5.28 67.606 6.10 317.15 102.49 7.21 405.93 405.93 601.80 6.16 67.363 6.66 298.60 102.71 6.24 431.57 431.57 597.78 4.80 67.315 3.54 400.41 102.65 8.11 398.63 398.63 614.90 5.03 67.445 6.20 325.11 102.77 6.57 428.84 428.84 656.44 3.97 67.827 5.53 346.74 102.83 7.09 434.49

434.49

Explanation / Answer

An increase in labour costs will shift Mc curve upwards to the left. Average costs will also rise

Lease payments will not change marginal cost but average cost will rise.

A decrease in cost of utilities will shift average cost curve downwards but marginal cost will not change

Marginal cost will shift upwards to left and even average cost curve will shift upwards

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