PSU ECON 104 Homework 3 - Points Awarded 91.75 Points...

Points Awarded 91.75
Points Missed 8.25
Percentage 91.8%
1.
SCENARIO B: Suppose that due to favorable economic conditions, the price that this firm can sell its product
for rises to $22.
For question 1. Fill in Table B - Each box is worth ½ point for a total of 9 points for Table B
TABLE B- The wage is still $150 and the price of output (Q) is now $22.
L Q MP
L
MRP Marginal Profit Total Profit
0 0 ---- ---- -------------
1 8 8
$
176
$
26
$
2 20 12
$
264
$
114
$
140
3 28 8
$
176
$
26
$
166
4 35 7
$
154
$
4
$
170
5 41 6
$
132
$
-18
$
152
6 45 4
$
88
$
-62
$
90
0
26
Table for Individual Question Feedback
Points Earned: 9.0/9.0
Correct Answer(s):
Box 1: 176;
Box 2: 26;
Box 3: 26;
Box 4: 264;
Box 5: 114;
Box 6: 140;
Box 7: 176;
Box 8: 26;
Box 9: 166;
Box 10: 154;
Box 11: 4;
Box 12: 170;

Box 13: 132;
Box 14: -18;
Box 15: 152;
Box 16: 88;
Box 17: -62;
Box 18: 90
2.
Use Scenario B/Table B to answer the questions 2 – 4 below.
(3 points) The profit maximizing output (Q) is
35
.
Table for Individual Question Feedback
Points Earned: 3.0/3.0
3.
(3 points) The profit maximizing level of labor (L) input is
4
workers.
Table for Individual Question Feedback
Points Earned: 3.0/3.0
Correct Answer(s): 4
4.
(3 points) The maximum profit for this firm is
170
.
Table for Individual Question Feedback
Points Earned: 3.0/3.0
5.
DOWNLOAD AND PRINT GRAPHING TEMPLATE (available in the homework 3 instructions). This
template already shows the outcome from scenario A. You will be adding results from scenario B to
these graphs.
(2 points) Using Scenario B/Table B, go to Graph 1 . Label the new profit maximizing Q and L combination on
the production function as point B.

Table for Individual Question Feedback
Points Earned: 2.0/2.0
Correct Answer(s):
6.
(3 points) Using Scenario B/Table B, go to Graph 2 and draw this firm’s new MRP curve (remember that MRP
= P* MPL, and since price changed, we know we have a new MRP curve!). Shade in the new area of profit.
Also label the new profit maximizing point as letter B.
Table for Individual Question Feedback
Points Earned: 3.0/3.0
Correct Answer(s):
7.

(3 points) Using Scenario B/Table B, draw this firm’s Supply curve on Graph 3 . You should construct a supply
curve as we did in lecture with point A representing the original price and output combination from scenario A
(original price was $20 combined with the profit maximizing Q of 28) and point B representing the price and
output combination after the change in economic conditions in Scenario B (price rose to $22, and the profit
maximizing Q you found in your answer for #2 above). Connect the two points and label your supply curve.