e360_apks_midterm2_solns

e360_apks_midterm2_solns - Midterm 2 Answer Key Andreas...

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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.
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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.
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Midterm 2 Answer Key Andreas Pape, Kai Sun 3 4 In general for these answers, there are a few different acceptable answers, depending
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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.

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e360_apks_midterm2_solns - Midterm 2 Answer Key Andreas...

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