h7_ans - SAC = 10/10 1 0.1(10 = 1 1 1 = 3 MC = 1.2(10 = 1 2...

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1 The Colorado College Department of Economics and Business Block 7 Econ 207 HW 7 ans. 1. (a) MC = d(TC)/dq = 0.2q + 10. Setting P=MC, p=.2q+10 = \$20 q= 50 . (b) Weekly profit = TR - TC = 200(50) – [0.1(50) 2 +10(50) + 50] =100 - 800 = 200 . (c) 2. (a) SMC = d(STC)/dq = 1+.2q Setting, P=MC we have P = 1 +.2q q = 5P - 5. (b) TC = TFC +TVC AVC = TVC /q = (q+0.1q 2 )/q = 1+0.1q For pizza shop MC =1 +.2 q > AVC (= 1+.01q) There is no shutdown price . Alternatively, the only point they meet is at Q=0, P=1. (c) SAC = TC/q = (10+q+0.1q 2 )/q = 10/q +1 +0.1q If the SAC is minimum then at that level of output SAC =MC.

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Unformatted text preview: SAC = 10/10 + 1+0.1(10) = 1+1+1 = 3 MC = 1+.2(10) = 1+ 2 = 3 . P=MR=AR q P AC MC E P e q e Profit 2 3. (a) STC = vK + wL = 10 × 100 + wL = 1,000 + 5L but q = 10 L so L = q 2 /100 Hence, STC = 1,000 + q 2 /20. (b) SMC = d(STC)/dq = 2q/20 = q/10. Use P = MC. 20 = .1 q so q = 200. L = q 2 /100 so L = 400. (c) If P = 15, P = MC implies 15 = .1q or q = 150, L = 225. 4. (a) q = 60 – 2P 2P = 60 – q. P = 30 - .5q TR = p.q = 30q - .5q 2 MR = d(TR)/dq = 30 – q (b) Equilibrium occurs at MR = MC 30 –q = .2q 30= 1.2 q q = 30/1.2 = 25 (c) Q P MC D MR 25 17.5 E...
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This homework help was uploaded on 04/19/2008 for the course EC 207 taught by Professor Ghosh during the Spring '08 term at Colorado College.

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h7_ans - SAC = 10/10 1 0.1(10 = 1 1 1 = 3 MC = 1.2(10 = 1 2...

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