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

This preview shows pages 1–4. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
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.
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.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 7

MT2F09Answers - ECO 304K INTRODUCTION TO MICROECONOMICS...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online