Homework Set 3

# Homework Set 3 - Homework Set 3 Chapters 6 7 Eco F304K...

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Homework Set 3: Chapters 6 & 7 Eco F304K Summer, 2008 Due Date: 6/26/08   Chapter 6: Perfect Competition 1. The following exercise reviews calculation of total revenues, total costs and profits for a firm Output Employee  Hours Output  Price Rent Wage  Rate Total  Revenues Total Costs Profits/Losse s 0 0 \$3 \$75 \$4 15 3 \$3 \$75 \$4 30 7 \$3 \$75 \$4 45 12 \$3 \$75 \$4 60 18 \$3 \$75 \$4 75 25 \$3 \$75 \$4 90 37 \$3 \$75 \$4 A. Calculate the values for total revenues, total costs, and profits or losses (use a minus sign for losses). B. For the data in table, the profit-maximizing level of output is (75/90) _______ units, with a profit of (\$47/\$50) _____. C. Suppose that the rent on the office space the firm is using increased from \$75 to \$95 while all other variables remain  unchanged. The new profit-maximizing level of output is (60/75) ______ units with a (profit/loss) _______ of (\$30/-\$30)  _________. D. The results in part C indicate that when the cost of a (fixed/variable) ______ factor of production change, the optimal level of  production (remains the same/changes) _______, but the level of profits or losses (remains the same/changes)  _____________. E. Suppose the price the firm receives increases from \$3 to \$5, while all other variables are at the original values.  The new  profit-maximizing level of output is (75/90) ______ with a profit of (\$227/\$200) ______.

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• Spring '08
• Ledyard

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