practice8notes - PD @ fl PADP 6950: Foundations of Policy...

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Unformatted text preview: PD @ fl PADP 6950: Foundations of Policy Analysis Supply PRACTICE Results from Golf Ball Game Let P =S5, PL=$1O, PK=S10 (where biucket) 2 o l -- 2 3 to or; 22 11> lfl l,”/ 2 2 low 222 L _ 42:6 3 3 ll 3:20 V20 3:30 1.8 ;."I fill/.63 10 2 4 ‘AImmwwflm-—»mew~~‘~--~'-mv"**'3~-Hm-«a"new.....,ALV,,V,,,‘_,..._~,K,* m m _ m MM____“’ 3 3 lo 60 5 3 3 :25 oo 3H2 3 4 Hp 70- 4 2 ll 90 23,5 4 3 W '70 35 4 s at ‘70 4:33 {0 ion igiqm [(0 3} h Q Questions - Does this firm have economiesof scale? (over a I what range?) W ). LEA l C tywtafli ( "\” ° Show graphically the profit when PQ:S lagggwwg, Ari-cw; ' “At what PQ will firm shut down? “LA-1C >Q A, Q {-140.52 - What will P(l be in the LR if competitive I industry and everyone has same cost curves? mm ATC (4+) D [AK l P < Wmc (fl Mam maxim QR; 4 kW; ('17) ma thwiivlkodn tail (vi [53 Problem with equations 0 A firm has cost function C(Q)=100+10Q ' What are the fixed costs? 5 (1‘) O — What is equation for AFC? 1:" - What are the variable costs? to (3.\ — What is equation for AVC? Avg :3 ' "0 ° What is the equation for ATC? ATC 10+ lat/59“ ° What are the marginal costs? MC l o (m lat/ax -~—:a m as it Draw costs curves @a’CS w - ‘\ W ‘ « M We lb "WW—*1 MMWW # Aw x25 - s M o ,,___\.,..——§flw~——”l-t"“*t"‘mtl—t—-—O 6 10 if") ‘2» 26:) X l Discussion ° If these are long-run costs, does this firm I J '- exhibit economies of scale? Lgfia Calm/EULA LM’KD - Why is the MC below the ATC for all Q? fies/Q incfiwfiflg AFC ° Can you think of a firm which might have a MC. (flea rial" horizontal lVlC curve like this? 12 l/wu/l/Y“ Let’s do it in reverse ° Our firm currently has one factory which costs $1000. ° To produce our first unit, we need workers who cost $2 each. ° Our production function is 0310/21.“ ' How much labor do we need to hireto produce Q units? (solve for L in terms of Q) gig} K ::.. l W V. r ‘2: L‘, w '“ Ll‘ '32) QurmmyLwo/ - What is the short-run tota cost as a function of Q? Recall: TC = PC + VC = K"‘PK+U‘PL rm _ .. "kl - l C l (.300 "t 01 (>1 A?) ' What is the ATC equation? A“"l C 1;“ (£16) (£2 V3 Draw costs curves loo 51o 'o goo iii-C13 2) Now you do one ° A flower shop owner has her choice of 3 different floor sizes: 200 sq ft, 500 sq ft, 1000 sq ft at a price of Sl/sq ft ° if she has F sq ft and sells Q bouquets a month, her variable costs will be cle)=Q2/F per month * For each Shep size: w What is her total average cost function? l C )- -— Graph the ATC: ' At what Q is average cost minimized? l” Cs :2 F: 2% 'M 4—" - At this Q, how much is average cost? 01 C REC/pl» ¢ Xm- zajrrvk/h « “W W73 a- r: 1:: Draw 3 costs curves and LRAC ...
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This note was uploaded on 01/18/2012 for the course PADP 6950 taught by Professor Fergi during the Spring '11 term at University of Georgia Athens.

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practice8notes - PD @ fl PADP 6950: Foundations of Policy...

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