Fill in the table below. The current wage is $100 and the price of output (Q) is $30. Each box is worth
½ of a point. Enter whole numbers only (no commas, no decimals, no dollar signs) and if a value is
negative, be sure to enter the negative sign.
L
Q
MP
L
MRP
Marginal Profit
Total Profit
0
0
    
    
          
0
1
6
6
180
80
80
2
14
8
240
140
220
3
19
5
150
50
270
4
23
4
120
20
290
5
26
3
90
10
280
6
28
2
60

40
240
2.
Use the table from question 1 to complete the next six questions. Enter the correct values in the
boxes below. Enter only whole numbers (no commas, no decimals, no dollar signs). Each fillinthe
blank below is worth 3 points.
This profit maximizing firm will hire
3
workers.
3.
This profit maximizing firm will produce
22
units of output.
4.
This firm’s maximum profit equals
60
.
Now suppose that the wage falls to $170. You will need to recalculate the values from the table,
given this new wage, to answer the questions below.
This profit maximizing firm will now hire 4 workers.
6.
This profit maximizing firm will now produce 28 units of output.
7.
This firm’s maximum profit now equals 160 .
8.
Use the following information to answer the next nine questions. Each fillintheblank is worth 3
points.
If your answer is in decimal form, enter it with 2 decimal places. For example, if your answer is .4,
enter it into the fillintheblank as .40, or if your answer is 1.4, enter it into the fillintheblank as
1.40. If there are no decimals in your answer, you will simply enter the number; so if your answer is
2, enter 2 with no decimals. Do not use commas.
Suppose the economy is characterized as follows:
AE = C + I + G + (XM)
C = 800 + .75(Y – T)  30 (r)
I = 600 – 50(r)
G = 300
X M = 25
T = 80
r = 5
Price level P is fixed at 1 (P=1)
I=600–50(5) =
350.
C=800+ .75(Y – 80)  30 (5)
C=800+0.75Y–60–150
C=590+0.75Y
AE = C + I + G + (XM)
AE = 590+0.75Y+350+30025
AE= 0.75Y+1215
Equilibrium Output
C=590+0.75Y
I = 350
The equilibrium condition is:
Y = C+I
Replace C with its expression and I with 350 to get:
Y = 590 + 0.75 Y + 350
Y=590+0.75Y+450
0.25Y=940
0.25Y=1040
Y=3,760
Y=4,160
Equilibrium Consumption
C=590+0.75(3760)
C=590+0.75(4,160)
C=3,410
C=3,710
Use the information above to get expressions for the consumption function and the AE equation.
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 Fall '13
 Economics, Inflation, Unemployment, input type=\