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midterm - Ryan Oprea Econ 200 Fall 2009 Midterm Exam This...

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Ryan Oprea Econ 200, Fall 2009 Midterm Exam This midterm is due in class on November 17. You may not work on this exam with any other party, though you are welcome to ask me to clarify mysterious questions. Points are out of 100. Assume all markets are competitive. 1. The production functions in the Widget industry is y = x 1 2 1 x 1 3 2 . Assume x 2 is at 8 and unchangable for the moment. Input x 1 cost $8 and input x 2 cost $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 firm produce? 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 (which is 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 build a plant in. Cars require steel (S) and labor (L). The production function is
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