sec_6 - PAM 2000: Section Handout 6 TA : Romita Mukherjee...

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Unformatted text preview: PAM 2000: Section Handout 6 TA : Romita Mukherjee March 10, 2009 ———————————————————————————————— (I) Suppose a firm employs labor as the only variable input. All workers are paid $20 per day. Output per day (a) and the variable costs are shown in the table below. Complete the table, showing labor, average variable cost, and marginal cost for the first 8 units of output. Draw a graph showing average and marginal cost. (II) True or False, explain your answer: “I paid $25 for the materials to make these flower arrangements, and sold them at the craft fair for $25, so I just broke even.” (III) If input prices are w = 3, and r = 2, and q = 10KL, what is the least cost input combination required to produce 60 units of output? How would input usage change if output is increased to 240 units? Sketch the solutions on a graph. (IV) Multiple Choice 1 (1) Suppose the total cost of producing T-shirts can be represented as T C = 50 + 2q . The average cost of the 5th T-shirt is (a) (b) (c) (d) 2 10 12 60 (2) Suppose the total cost of producing T-shirts can be represented as T C = 50 + 2q . The marginal cost of the 5th T-shirt is (a) (b) (c) (d) 2 12 52 60 (3) If an isocost line crosses the isoquant twice, a cost minimizing firm will (a) use a different isocost line to select the bundle of inputs. (b) use the input bundle associated with the intersection on the higher point of the isoquant. (c) use the input bundle associated with the intersection on the lower point of the isoquant. (d) Both B and C 2 ...
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This note was uploaded on 11/14/2009 for the course PAM 2000 taught by Professor Evans,t. during the Spring '07 term at Cornell University (Engineering School).

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sec_6 - PAM 2000: Section Handout 6 TA : Romita Mukherjee...

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