# ps6f06 - UNIVERSITY OF WISCONSIN Economics 101 Fall 2006...

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UNIVERSITY OF WISCONSIN Economics 101 – Fall 2006 Problem Set 6 Due on November 6 at 2:30pm in your TA’s mailbox Please be sure to include (1) your name, (2) your teaching assistant’s name, and (3) your section time on your answers. Please staple pages together. Also note that late homeworks will not be accepted. Remember that you can help each other but each student has to hand a hand-written solution of the problem set. 1. a. Question 1, page 296 in the book. b. Question 2, page 296 in the book. c. Question 3, page 296 in the book. 2. The market for hamburgers in one faraway state is characterized by perfect competition. Firms and consumers are price takers and there is free entry and exit. There are large numbers of buyers and suppliers. Assume this industry is a constant cost industry. The demand for hamburgers is P=20- Q and the supply curve is P=Q where Q is measured in hundreds of hamburgers per day. a. Find the equilibrium price and quantity in this market.
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Unformatted text preview: b. Compute the consumer surplus and producer surplus in this market. The sort run total and marginal cost functions for one individual firm (restaurant) are given by the following equations (assume all firms are identical in terms of their technologies, and therefore their cost functions): (q is the number of hamburgers per day produced by one restaurant) TC = (1/4)*q 2 + 25 MC = q /2 c. Find the quantity produced by each firm. How many firms are there in the market? d. Find the economic profits. Is the observed price sustainable in the long run? e. What happens to this market in the long run? Will there be entry or exit of firms in this market? Explain f. What is the long run price and quantity in this market? What is the long run quantity produced by each firm in this market? 3. Question 5, page 296 in the book. 4. Question 13, page 296 in the book. 5. Question 2, page 333 in the book....
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