PS+9 - ARE100A INTERMEDIATE MICROECONOMICS: THEORY OF...

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ARE100A INTERMEDIATE MICROECONOMICS: THEORY OF PRODUCTION AND CONSUMPTION FALL QUARTER 2009 Problem Set 9 Due Thursday November 19 at the beginning of class 1. Last year Ford Motor company lost \$5billion and they will have lost another few billion this year. Why don’t they just shut down and save a lot of losses? 2. Explain which factor of production and who earns the economic rent in each of these cases. a. I grow the sweetest peaches at the farmers market and get a very high price because I know the secret of when and how to fertilize. b. I grow the sweetest peaches at the farmers market and get a very high price because I own a peach field near Davis that has a perfect microclimate. c. I grow the sweetest peaches at the farmers market and get a very high price because I lease a peach field near Davis that has a perfect micro-climate. 3. The industry supply function is Q = -1000 + 200P. The product from this industry has perfect substitutes and industry demand may be written as P = \$20 per unit. a. Draw the equilibrium showing producer surplus and variable cost.
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