ps7 - Cost Curves 1) A wheat farmer has total production...

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UNIVERSITY OF WISCONSIN Economics 101 – Fall 2005 Wei Zhang Problem Set 7 Due By October 31, 2005 (in class) Public Goods and Externalities: Multiple Choice. 1) An example of a good that is both rival and excludable is a) the defense services provided by a new stealth bomber. b) a pair of pants. c) a beautiful sunset. d) an uncrowded theme park such as Walt Disney World 2) Which of the following illustrates the concept of external benefit? a) Good weather increases the size of the wheat crop. b) A new pesticide increases the size of the wheat crop. c) A gardener enjoys her flowers. d) Neighbors enjoy the gardener’s flowers.
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Unformatted text preview: Cost Curves 1) A wheat farmer has total production costs given by the equation TC=100+5Q, where Q is output, measured in bushels of wheat. a. What is the farmer's marginal cost (MC) of production? b. What is the farmer's fixed cost? Give some examples of what costs might be fixed for a wheat farmer. c. Write the equation giving the farmer's variable cost as a function of quantity. What are examples of variable costs for a farmer? d. Write the equations for the farmer's average total cost (ATC) and average variable cost (AVC), both as functions of Q. e. Show the ATC, AVC, and MC on one graph. Explain what is happening to average fixed costs as Q increases, and explain how this relates to what you see in your graph....
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