e360_apks_midterm2_solns

# e360_apks_midterm2_solns - Midterm 2 Answer Key Andreas...

This preview shows pages 1–3. Sign up to view the full content.

Midterm 2 Answer Key Andreas Pape, Kai Sun 1 1. a. FC(q)=75 AC(q)=10q+75/q AVC(q)=10q MC(q)=20q b. p short run supply AVC q P=MC(q)=20q q=p/20 AVC=10q So AVC(q)<MC(q)=p for all q; Therefore don’t shutdown c. TC 2 (q)=10q 2 +175 No change in short run supply In the long run, firms may leave since FC is higher causes profit to be lower.

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

View Full Document
Midterm 2 Answer Key Andreas Pape, Kai Sun 2 2. a. MPL=10000/month MPK=20000/month w=\$1600/month r=\$1000/month Bang for the buck for labor = 10000/1600 = 6.25 Bang for the buck for capital = 20000/1000 = 20 b. He is not minimizing costs. Buy more capital. (Higher bang for the buck) 3. a. AC(q) = (q-2000) 2 + 4 Profit maximization after entry (in the long run) means profit=0, or p LR =AC min =4 when q=2000. b. p=4, q D =8000-500*4=6000 Each firm produces 2000, n=6000/2000=3 firms. c. Elasticity of long run supply curve is infinity b/c it’s flat.
Midterm 2 Answer Key Andreas Pape, Kai Sun 3 4 In general for these answers, there are a few different acceptable answers, depending
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 09/18/2010 for the course ECON 360 taught by Professor Andreaspape during the Fall '08 term at Binghamton University.

### Page1 / 3

e360_apks_midterm2_solns - Midterm 2 Answer Key Andreas...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online