Suppose That the Inverse Demand Function for Wool Is P

question 47

Essay

Suppose that the inverse demand function for wool is p = for some constant A. Suppose that of the world's wool is produced in Australia.
a. If Australian wool production increases by 1% and the rest of the world holds its output constant, what will be the effect on the world price of wool?
b. How does the marginal revenue to Australia from an extra unit of wool relate to the price of wool?

---

Definitions:

Cost Curves

Graphical representations used in economics to show the total cost of producing different quantities of output, helping businesses determine optimal production levels.

Average Fixed

Assuming it's intended as "Average Fixed Costs," it is the fixed costs divided by the quantity of output, representing the cost per unit that does not change with the level of production.

Average Total

Typically refers to the average total cost, which is the total cost of production divided by the number of goods produced.

Total Variable

Expenses that change in proportion to the activity of a business, such as costs of goods sold, which vary with the level of production or sales volume.