Solution_key_to_HW5_F10

# Solution_key_to_HW5_F10 - Econ 313 Fall 2010 TA: Peiran Jiao

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Econ 313 TA: Peiran Jiao Fall 2010 [email protected] OHs: Th 1 - 3 pm (Blair Reading Room) 1 Solution Key to Assignment (5) 1. Swift is a small firm whose total cost function is given by a. What is Swift’s average cost function? What is its marginal cost function? b. Suppose Swift faces perfectly elastic demand at a price of \$29/unit. How much will it produce? What is its net profit? c. What is Swift’s shut-down price? d. Swift has two competitors; all three firms use the same production technology (and thus have identical cost functions). Assume no other firms enter the market, and each of the three producers behaves as a price-taker . Total market demand is . In equilibrium, how much will each firm produce , and what is the market price?

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Econ 313 TA: Peiran Jiao Fall 2010 [email protected] OHs: Th 1 - 3 pm (Blair Reading Room) 2 e. Now allow free entry and exit of (identical) firms into the market. Total market demand remains the same as in ( d ). What is the long-run equilibrium in terms of market price , number of firms , firm size (output level), and firm profits ? 2. A few years ago, David Card and Alan Krueger published a study of minimum wage laws and employment in the fast food industry. Based on phone samplings of restaurants, they found
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## This note was uploaded on 11/01/2010 for the course ECON 313 taught by Professor Borecde during the Fall '10 term at Claremont.

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Solution_key_to_HW5_F10 - Econ 313 Fall 2010 TA: Peiran Jiao

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