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Maymester%202010%20-%20MIDTERM%20-%20PINK

Maymester%202010%20-%20MIDTERM%20-%20PINK - first draw the...

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Units of X 10 5 0 5 10 Units of Y 15 15 MRS = -PX/PY = -15/5 = -3 The price must be greater than minimum AVC, which we have where AVC(Q) = MC(Q) or 3,000 -40Q +(1/2)Q2 = 3,000 – 80Q + (3/2)Q2 Q2 – 40Q = 0 Q = 40 Minimum AVC = 3,000 – 40(40) + (1/2)(40)2 = 2,200 Acme maximizes profit where MC(Q) = MR = P, or 3,000 -80Q + (3/2)Q2 = 12,350 (3/2)Q2 – 80Q – 9,350 = 0 Q= -(-80)±-802-4(32)-9,3502(32)=80±62,5003=80±2503=-56,67;110 Acme is earning an economic profit: Profit = 12,350(110) – (600,000 + 3,000(110) – 40(110)2 + (1/2)(110)3) = 1,358,500 – 1,111,500 = 247,000 We would expect firms to enter this industry, increasing the supply and lowering market price. 3600 2800 9 18 20 AVC ATC MC \$ Q TFC = AFC Q = (20 – 9)2,800 = 30,800 = 140K K = 30,800/140 = 220 TVC = TC - TFC = 18(3,600) – 30,800 = 34,000 = 85L L = 34,000/85 = 400 MC = w/MPL MPL = w/MC = 85/18 = 4.72 |MRTS| = MPL/MPK = 4.72/6.25 = 0.76 > 0.61 = 85/140 = w/r Q 20 15 10 5 0 5 10 20 15 P S D EQ,P = (| Q/NP)(P/Q) = (-1)(12/8) = -1.50 CS = ½ (10)(10) = 50 0 PS = 8(2) – ½ (2)(1) = +15 CSNew = ½ (8)(8) = 32 CS = 32 – 50 = -18 0 CS + PS = - 18 + 15 = -3 leisure. His MRS = - ½ (288/16) = - \$9 per hour of leisure. The overtime offer pays him, at the margin, \$36/hour to reduce his leisure time. He would b 0 units of capital and 20 units of labor to minimize costs. Per Unit Cost = (wL + rK)/Q = [100(20) + 50(40)]/1000 = 4.00 PV= 1+0.060.08-0.0610= 530 ∆Revenue= 100,0001+-1.12+120,000-0.05+0.04=-720 d first draw the MLC curve. It has the same intercept as the ALC or Supply curve, but it has twice the slope. Wage 200 Supply 150 100 50 Demand 200 150 100 50 Labor = P MPL MPL = VMP/P = 110/2.75 = 40 = Revenue net of labor costs – Fixed Costs = ½ (180)(90) – 7,800 = 8,100 – 7,800 = 300 Revenue net of labor costs – Fixed Costs = ½ (120)(120) – 7,800 = 7,200 – 7,800 = - 600 Price=10,0001+0.00222=9,989.01 91201+ie10=1+0.040730 .0407301.039120-1=0.0439 or 4.39 percent Q. Thus its marginal revenue function is MR = 100 – (2/5)Q. XYZ maximizes revenue if XYZ maximizes profits if 0.243 + 0.231 + 0.179 + 0.151 = 0.804 0.2312 + 0.2432 + 0.0842 + 0.1792 + 0.1512) = 1869 = 10,000 2 0.179 0.151 = 541 1.43/0.78 < 2 – 2(0.20) < β4 < 0.88 + 2(0.20) – 104.4(100) + 1.43(50,000) +0.88(100,000) = 46,104 =-104.4×10046,104=-0.23 Q1 = 30 and Q2 = 45. Total output Q = 30 + 45 = 75. The price we will charge: (30)2 = 7600 (45)2 = 9725 A partial representation of Ellen’s tastes and preferences over baskets of two goods, Good X and Good Y, is shown in the graph below: Current market prices for Good X and Good Y are P X = 15 and P Y = 5. Ellen’s income that she has available to purchase X and Y is is M = 75. She is a utility maximizer, and consumes integral quantities of X and Y. 1. Ellen’s marginal rate of substitution at her utility maximizing basket of X and Y equals ______ units of Y per unit of X. a) -1/3 b) -2/3 c) -3/2 d) -2 e) -3 2. The price of good X falls to P X = 5. The price of good Y and Ellen’s income remain unchanged. The change in Ellen’s quantity demanded of good X following this fall in the price of X due to the substitution effect equals _____ units of X.

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