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Assignment 3 - ECON314 - f10

# Assignment 3 - ECON314 - f10 - ECON314 Intermediate...

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1 ECON314 – Intermediate Microeconomics Assignment no. 3 St. Louis University – Madrid Campus David Howden October 29 th , 2010 Please answer all questions legibly. Due date will be November 19 th , in class. There are a total of 25 marks. 1. The only variable input a janitorial firm uses to clean offices is workers who are paid a wage, w , of \$8 an hour. Each worker can clean four offices an hour. Determine the variable cost, the average variable cost, and the marginal cost of cleaning one more office. Draw a diagram to show the variable cost, average variable cost, and the marginal cost curves. (4 marks) 2. Suppose the government increases payroll taxes to 25% of a workers wage. What effect will this tax have on the firm’s choice of labor and capital to produce a given level of output? (2 marks) 3. Given the formulas for and plot AFC , MC , AVC , and AC if the cost function is (4 marks): C = 10 + q 2 4. In late 2004 and early 2005, the price of raw coffee beans jumped as much as 50% from the

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Assignment 3 - ECON314 - f10 - ECON314 Intermediate...

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