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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, Aricw;
' “At what PQ will ﬁrm shut down? “LA1C >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~——”lt"“*t"‘mtl—t——O
6 10 if") ‘2» 26:) X l Discussion ° If these are longrun 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 shortrun 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 iiiC13 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.
 Spring '11
 Fergi

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