Econ Problem Set 5

Econ Problem Set 5 - Michael Samuels 11/19/06 Ping Kang 37...

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Michael Samuels 11/19/06 Ping Kang 37 G12358459 Problem Set 5 1 . A. Total Cost = Total Quantity. 5 x 60 – 4 x 60 / 24 -21 60 / 3 = 20.5 workers maximize profits. It is the point where total cost equals the total price. B. The amount of workers would to 6 when price is $30 per lawn, and it would stay at 6 at $40 per lawn. The curve of marginal product of labor levels out at 6 workers, which means there will be no more significant output in production after 6 workers. 2 . Neither of them are silly. The demand for chocolate is higher in the short run then vegetables. However the long run of vegetables is higher then chocolate, this means that the Total utility of vegetables is greater then chocolate; however, the marginal utility for chocolate would be higher. Since demand is higher in the short run and marginal utility is higher, price will be higher 3 . It all depends on the opportunity cost of traveling to taco bell. If it is worth all the time spent traveling and waiting in line, and the gas spent going to taco bell, then it is worth the trip. Personally, I love taco bell and it would be worth my time and gas to travel to Taco Bell for the food. 4. Replacement cost is one part of opportunity cost. Replacement cost can be less then opportunity cost, since it is a part of the cost; it is part of the make up of opportunity cost. Replacement cost is never higher then opportunity cost, because after replacement cost, you still have time spent and potential spending on other items. There is always additional opportunity cost on top of replacement cost 5 . A. mPland / Pland = mPlabor / Plabor = mPtractor / Ptractor = 1 / Poutput 2000 / 500 = 24000 / 8000 = 2000 / 1000
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Econ Problem Set 5 - Michael Samuels 11/19/06 Ping Kang 37...

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