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380 Problem set 10

380 Problem set 10 - Profits Problem Set 10 Econ 380 R Pope...

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Profits Problem Set 10 Econ. 380 R. Pope Due: April 8 W2011 Less Technical 1. TFU For a competitive firm, a doubling of inputs with fixed input prices must lead to a doubling of profit. 2. A city imposes a fixed fee on firms to operate. TFU. The fee will not change the optimal output of producing firms in the short run but may cause the firm not to enter (produce zero)? 3. Sometimes fuel used as an input is not taxed (e.g., agricultural exemption). Contrast the profit maximizing use of fuel in the case where it is and is not taxed? 4. Profit maximizing demands for inputs are sometimes called derived demands because the demands are dependent on conditions in the output market and hence derived from the value of output price, P. Explain how a rise in output price, P, might normally be expected to impact the demands for inputs? More Technical (calculation) 5. John’s Lawn Mowing Service is a small business that acts as a price taker (i.e., MR=P). The prevailing market price of lawn mowing is $20 per acre. John’s costs are
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