Econ 100A PS3 - Department of Economics University of...

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Econ 100A-Spring 2010 Page 1 Problem Set 3 Department of Economics Spring 2010 University of California Prof. Woroch Economics 100A PROBLEM SET 3 Due: Thursday, March 11, 2010, 2:00 PM (in lecture) I. SHORT ANSWERS: Provide brief but complete explanation for each of the below statements. 1. An individual firm that sells in a market that satisfies competition conditions faces a perfectly elastic demand curve and yet the market demand curve is price elastic. 2. A firm’s profit and the producer surplus in a market may or may not be equal. 3. For each on of the following industries, explain why you think it is either a constant, increasing or decreasing-cost industry: (a) Coffee bean industry; (b) Crude oil industry, (c) Automobile industry. 4. For many years, the $3 billion U.S. sugar industry has been protected from low-cost foreign producers by a “sugar quota” that limits imports of sugar. In recent years, the price of sugar in the U.S. has hovered around 20 to 30 cents per pound while the world price was as low as 4 cents per pound. Using a graph, show how the domestic producer, consumer and total surpluses are affected by the sugar quota compared to a world with no quota at all. II. MULTI-PART QUESTIONS 1. [Competitive Firm Supply] Suppose a firm that produces cat food has the following total cost function: TC(q) = 100 + 4q 2 , where all its fixed costs are sunk. a) What is the minimum price necessary for the firm to earn profit? b)
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This note was uploaded on 07/15/2010 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at University of California, Berkeley.

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Econ 100A PS3 - Department of Economics University of...

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