chap6,7solution - Problem set 3 49.5 total points Chapter 6...

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Problem set 3 49.5 total points Chapter 6 PROBLEMS 1. Use Figure 6.4 to determine: a. How many baskets of fish should be harvested at market prices of i. $17 ii. $13 iii. $ 9 b. How much total revenue is collected at each price? c. How much profit does the farmer make at each of these prices? (a) (i) 5 baskets of fish. 1 pt (ii) 4 baskets of fish. 1 pt (iii) 3 baskets of fish. 1 pt (b) (i) Total revenue = P x Q = $17 x 5 = $85. 1 pt (ii) Total revenue = P x Q = $13 x 4 = $52. 1 pt (iii) Total revenue = P x Q = $9 x 3 = $27. 1 pt (c) (i) Total profit = Total revenue – Total cost = $85 - $61 = $24. 1 pt (d) (ii) Total profit = Total revenue – Total cost = $52 - $44 = $8. 1 pt (iii) Total profit = Total revenue – Total cost = $27 - $39 = -$12. 1 pt 4. Graph the market behavior described in the Headline on p. 144. Q 2 Q 1 P 2 P 1 S 2 S 1 D Price per Laptop Q of Laptops 1 pt
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5. Suppose that the monthly market demand schedule for Frisbees is: Price $8 $7 $6 $5 $4 $3 $2 $1 Quantity Demanded 1,000 2,000 4,000 8,000 16,000 32,000 64,000 150,000 Suppose further that the marginal and average costs of Frisbee production for every competitive firm are Rate of Output 100 200 300 400 500 600 Marginal Cost $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 Average Cost 2.00 2.50 3.00 3.50 4.00 4.50 Finally, assume that the equilibrium market price is $6 per Frisbee. a. Draw the cost curves of the typical firm and identify its profit maximizing rate of output and its total profits. b. Draw the market demand curve and identify market equilibrium. c. How many Frisbees are being sold in equilibrium? d.
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chap6,7solution - Problem set 3 49.5 total points Chapter 6...

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