{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Econ 201 Spring 2010 Exam 2 Part 2

# Econ 201 Spring 2010 Exam 2 Part 2 - 7 lfprofit if...

This preview shows pages 1–2. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 7. lfprofit if negative (it < 0) and production is positive (y > 0), it must be that... (Please circle one response.) a. AC>MC>AVC b. AC>AVC>MC c. MC>AC>AVC d. AVC>AC>MC 8. Alexa’s cost function is C(y) = y1 + 25 . (10 points) a. At what price does proﬁt equal zero? b. At or below what price does Alexa choose not to produce? 9. Consider the CRS technology y = 2X . The output price is P, and the input price is w. How big does the output price have to be (relative to the input price) for a competitive ﬁrm to make inﬁnite proﬁts in the PMP‘? 10. Based on the Utility Possibility Set, clearly label the points corresponding to the Farm; Se! (all PO allocations). “a 11. Bert and Ernie are competitive consumers in a pure exchange economy. Their endowments of good I and 2 are 33m = (10,10) and egm : (10,15). The prices ofgoods 1 and 2 are P1 and P2. Bert’s demand 3 m3“ . Ernie’s demand function for good I is X 15m = mm” . (10 points) function for good 1 is X13” = 4P1 2P: a. What is the aggregate amount ofgood 1? b. What are m Ben and m Em (as a function of prices and endowments)? c. Normalize Pi : 1. What are the equilibrium prices, i.e. what is P2 ? 12. Suppose that the social planner wants to implement a competitive equilibrium in which Bert consumes exactly 5 units of good 2. To do so, the social planner transfers good one from Bert to Ernie. Bert’s demand function for good 2 is X?” = :32” .Norrnalize P1 =1, as above. 115 pointst 2 a. Denote the transfer from Bert to Ernie as T. What are mayf and Int-m now? (Hint: take your answer to 11b, subtract T from Bert’s income, and add Tto Ernie’s income.) b. The social planner wants Bert to consume exactly 5 units of good 2. Write the equation that sets Bert’s demand for good 2 equal to 5. (Hint: it should only be a function of P2 and T.) c. Write the equation that determines the equilibrium prices, i.e. that determines P2 , since P, = 1. (Hint: it should only be a function of P2 and T.) d. Use the equations in b and c to solve for T (get a number). This is the transﬁr that implements the social planner’s desired equilibrium. ...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern