MT2F09Answers - ECO 304K: INTRODUCTION TO MICROECONOMICS...

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1 ECO 304K: INTRODUCTION TO MICROECONOMICS Unique # 33645 Fall 2009 Prof. Wiseman Midterm 2 Instructions: 1. Please PRINT your name and UTEID here: ____________________________________________________________ 2. Please sign here: ____________________________________________________________ 3. The exam should include 7 pages (counting this cover sheet), plus two additional pages of blank scratch paper. If your exam is missing any pages, please raise your hand. 4. Answer the short-answer questions in the space provided on the test sheet or on the reverse side. Answer the multiple-choice questions on a Scantron sheet. Write your name and UTEID on each page. 5. All exams must be turned in by the end of the class period, when the bell rings. Late exams will get a score of zero. 6. You are a good economist. Allocate your time accordingly – do the easy questions first. Please do not cheat. 7. Scores for the exam are as follows: Points Grade Points Grade Points Grade 40 100 26 74 12 46 39 99 25 72 11 42 38 97 24 70 10 40 37 95 23 68 9 36 36 93 22 66 8 32 35 91 21 64 7 28 34 89 20 62 6 24 33 88 19 60 5 20 32 86 18 58 4 16 31 84 17 56 3 12 30 82 16 54 2 8 29 80 15 52 1 4 28 78 14 50 0 0 27 76 13 48
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2 Name and UTEID:___________________________________________________ 1 . You are the owner of a firm that sells crepes from a trailer. You must pay each worker you hire $5 per hour, and each worker can produce 1 crepe per hour. You have no other costs. a. (2 points) Derive your total cost, average total cost, total variable cost, average variable cost, and marginal cost for each unit of output. TC = TVC = 5Q, ATC = AVC = MC = 5. 1 point for 2-4 correct, 2 points for all 5. b. (2 points) Now suppose that you have rented a crepe-folding machine for $30. With the machine, each worker you hire can produce 2 crepes per hour. Derive your total cost, average total cost, total variable cost, average variable cost, and marginal cost for each unit of output. TC = 30 + 2.5Q, ATC = 2.5 + 30/Q, VC = 2.5Q, AVC = 2.5, MC = 2.5 1 point for 2-4 correct, 2 points for all 5. Full credit to solutions that assume every second crepe is free; and partial credit to solutions that show the costs only at even-numbered output. c. (2 points) Derive your long-run average total costs. (HINT: at which levels of output do you want to rent the machine, and at which levels of output do you not?) LRATC is the smaller of 5 (no machine) and 2.5 + 30/Q (machine). The latter is smaller for Q > 12. So LRATC = 5 for Q 12 and LRATC = 2.5 + 30/Q for Q > 12. 2 points for correctly deriving the minimum of parts a and b (even if a and b are wrong); can get 1 point for explaining that LRATC is the minimum of the two SRATCs, even if the derivation is not correct.
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3 Name and UTEID:___________________________________________________ 2. Suppose that the football game between the University of Texas and Oklahoma State University will be held on the campus of OSU, so that any UT students who attend must, in addition to buying a ticket, travel to OSU, rent a hotel room, etc. For simplicity, assume that there are equal numbers of UT and OSU students, and that the distribution of valuations for tickets in both groups is the same.
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MT2F09Answers - ECO 304K: INTRODUCTION TO MICROECONOMICS...

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