Ch 6 Answers to Problems

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Chapter 6 Answers to Problems 1. If the price of a fossil is below \$5.40, Zoe should devote all her time to photography because when the price is, say, \$5 per fossil, an hour spent looking for fossils will give her 5(\$5) = \$25, or \$2 less than she’d earn doing photography. If the price of fossils is \$5.40, Zoe can spend one hour searching, will supply 5 fossils, and will get \$27 revenue, the same as an hour of photography (any price above \$5.40 will yield more revenue than photography). However, the second hour would yield only 4 additional fossils or \$21.60, so she should not spend any further time looking for fossils. If the price of fossils rises to \$6.75, however, the additional hour gathering fossils would yield an additional \$27, so gathering fossils during that hour would then be the best choice, and Zoe would therefore supply 9 fossils per day. Using this reasoning, we can derive a price-quantity supplied relationship for fossils as follows: Price of fossils (\$) Number of fossils supplied per day 0 0 5.40 5 6.75 9 9.00 12 13.50 14 27.00 15 If we plot these points, we get Zoe’s daily supply curve for fossils: 2. The marginal cost of each of the first 6 air conditioners produced each day is less than \$120, but the marginal cost of the 7 th air conditioner is \$140. So the company should produce 6 air conditioners per day.

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## This note was uploaded on 02/01/2008 for the course ECON 201 taught by Professor Doyle during the Fall '07 term at James Madison University.

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Ch 6 Answers to Problems - Chapter 6 Answers to Problems 1....

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