101H2 - Homework #2 Economics 101 Dr. Dezhbakhsh You must...

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Homework #2 Economics 101 Dr. Dezhbakhsh You must do all of these practice problems, but only turn in the ones designated as TURN-IN. You do the problems on an ongoing basis and as we cover each topic (see the syllabus). You turn in the solutions to the TURN-IN problems (STAPLED AND NEAT) one week before the exam as noted on the syllabus. Solutions to all problems will then be posted. 1- (TURN-IN) The amount of fish caught per week on a trawler is a function of the crew size assigned to operate the boat. Based on past data, the following production schedule was developed: Crew Size (Number of Men) Amount of Fish Caught per Week (Hundreds of Pounds) 2 3 3 6 4 11 5 19 6 24 7 28 8 31 9 33 10 34 11 34 12 33 a) Calculate the marginal product of labor. b) How large a crew should be used if the trawler owner is interested in maximizing the amount of fish caught? c) How large a crew should be used if the trawler owner is interested in maximizing the average amount of fish caught per man? (First compute average product and marginal product of labor.) 2- Mary Graham has worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $100,000 per year. Mary is considering establishing her own real estate agency. She expects to generate revenues during the first year of $2,000,000. Salaries paid to her employees are expected to total $1,500,000. Operating expenses (i.e., rent, supplies, utility services) are expected to total $250,000. To begin the business, Mary must borrow $500,000 from her bank at an interest rate of 15 percent. Equipment will cost Mary $50,000. At the end of one year, the value of this equipment will be $30,000 even though the depreciation expense is only $5,000 during the first year given that the equipment has a 10 year expected life. a) Determine the accounting profit for this venture. b) Determine the economic profit for this venture. c) Which of the costs for this firm are explicit and which are implicit? 3) Consider the following cost information for a pizzeria: Q(dozens) Total Cost Variable Cost 0 $300 $0 1 350 50 2 390 90 3 420 120 4 450 150 5 490 190 6 540 240 a) What is the pizzeria’s fixed cost?
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b) Construct a table in which you calculate the marginal cost per dozen pizzas using the information on total cost. Also calculate the marginal cost per dozen pizzas using the information on variable cost. What is the relationship between sets of numbers? Comment. 4) Consider the following table of long-run total cost for three different firms: Quantity 1 2 3 4 5 6 7 firm A $60 $70 $80 $90 $100 $110 $120 firm B $11 $24 $39 $56 $75 $96 $119 firm C $21 $34 $49 $66 $85 $106 $129 Does each of these firms experience economies of scale or diseconomies of scale? Perfectly Competitive Markets
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101H2 - Homework #2 Economics 101 Dr. Dezhbakhsh You must...

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