Ryan OpreaEcon 200, Fall 2009Midterm ExamThis midterm is due in class on November 17. You may not work on this exam with any other party, thoughyou are welcome to ask me to clarify mysterious questions. Points are out of 100. Assume all markets arecompetitive.1. The production functions in the Widget industry isy=x121x132. Assumex2is at 8 and unchangable forthe moment. Inputx1cost $8 and inputx2cost $5 per unit.(a) What is the variable cost, fixed cost (if any), total cost, average cost and marginal cost?(b) Suppose there are 200 firms in the industry and demand is q=500-p. How much will each firmproduce? What will their profits be?(c) What is producer surplus?(d) Suppose the government only allows Widget production in 200 buildings in the whole city (whichis why there are only 200 firms). What is the market price of a Widget building and why?(34 points)2. You are chief economist for a car manufacturer and are trying to decide which of two countries to builda plant in. Cars require steel (S) and labor (L). The production function is
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