Fall '07 Hourly 2

Fall '07 Hourly 2 - TUFTS UNIVERSITY Department of...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
TUFTS UNIVERSITY Department of Economics Hourly Exam #2 Economics 16 Quantitative Intermediate Theory, Micro Professor Linda Datcher Loury Fall 2007 Read each question carefully. Answer both questions. 1) Farms 1-4 all have long term contracts to produce 10,000 seedlings per month for Home Depot. All four farms initially used 100 units of conventional fertilizer and 50 units of ecologically safe (or green) fertilizer to grow the seedlings. This was the least cost choice for all farms. Each unit of green fertilizer costs $200 and each unit of conventional fertilizer costs $40. The total cost of growing the seedlings was initially $14,000 per month. Now suppose that, because many more farmers have become concerned about the environment, the price of green fertilizer rose to $250 per unit. a) At farm 1, the price of each unit of conventional fertilizer increased to $50 at the same time that the cost of green fertilizer rose. Because the price of green fertilizer increased by $50 and the price of conventional fertilizer increased by $10, the manager at farm 1 believes that she can keep total costs from rising by reducing the amount of green fertilizer and increasing the amount of conventional fertilizer used to produce the 10,000 seedlings. Should the manager at farm 1 increase the amount of green fertilizer, reduce the amount of green fertilizer, keep the same amount of green fertilizer, or does it depend? By how much do total costs change? Be as specific as you can. Explain your answers thoroughly. b) At farms 2 and 3, the price of each unit of conventional fertilizer increased to $80 at the same time that the cost of green fertilizer rose. After the change in the prices of conventional and green fertilizer, farm 3 used less green fertilizer than farm 2.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern