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PS 3 202 marking guide (Winter 2011)

# PS 3 202 marking guide (Winter 2011) - 202 Problem Set 3...

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202 Problem Set 3 marking guide (Winter 2011) (1) 25 points total (a) 10 points total 2 points: understanding that MC = w/MP L 2 more points: inferring that diminishing MP L begins at the point where MC begins to increase 2 more points: appreciating that MC = ∆TVC/∆x A 2 more points: calculating specific values for MC (4, 3, 5, 8, 12, 16) from table 2 more points: identifying x A = 3 (where MC = 5) as initial point of diminishing MP L (b) 10 points total 2 points: defining TR = P x x A 2 more points: inferring that P x = 96/6 = 16 2 more points: knowing that profits are maximized where MR = MC 2 more points: understanding (implicitly or explicitly) that P x = MR for perfectly competitive firm 2 more points: determining that MR = MC when x A = 6 (c) 5 points total 2 points: knowing that firm operates if TR > TVC at (best) point of operation 1 more point: seeing that TR = 96 > TVC = 48 in this case 2 more points: deducing that firm does operate, given these facts (2) 25 points total (a) 6 points total 2 points: knowing that TFC is TC at the point where x A = 0 2 more points: knowing that TC = AC* x A , yielding 2 more points: interpreting 100 to be level of TFC, since it is value of TC when x

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PS 3 202 marking guide (Winter 2011) - 202 Problem Set 3...

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