ajaz_eco_204_2012_2013_chapter_11_producer_theory_PP

ajaz_eco_204_2012_2013_chapter_11_producer_theory_PP -...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. 1 ECO 204 Chapter 11: Practice Problems & Solutions for Producer Theory The Basics in ECO 204 (this version 2012-2013) Department of Economics (STG), ECO 204, Sayed Ajaz Hussain _________________________________________________________________________________________________ P RACTICE P ROBLEMS W ITH S OLUTIONS TO : C HAPTER 11 : Producer Theory The Basics Updated: 2/23/2013 (11.1) True or false: solving a CMP with the production function will yield identical answers for ( ) as solving the CMP with the production function ( ) ? Give a very brief explanation. Do NOT solve the Cost Minimization Problem. (11.2) In the paper “Econometric Analysis of Collusive Behavior in a Soft - Drink Market” published in the Journal of Economics and Management Strategy (Summer 1992), Gamsi, Laffont and Vuong (GLV) estimated the following demand functions for Coke and Pepsi concentrate syrup based on quarterly data 1968 1986: The subscript is for Coke and is for Pepsi and is quarterly quantity of syrup sold, is price of syrup (1986 dollars), is square root of quarterly advertising expenses (1986 dollars), if spring/summer and zero otherwise, and is real income (1986 dollars). GLV estimated Coke and Pepsi’s average variable cost to be (these are constant across seasons): What type of “returns to variable inputs” do Pepsi and Coke have? Give a brief explanation. (11.3) Founded in January 2010, Dulce & Havana (D & H) designs and manufactures high end men’s jackets right here in Toronto. D & H manufactures jackets according to the production function: Here is number of jackets manufactured, is fixed labor, is materials, and is fixed capital. Does D & H have increasing, constant, or decreasing returns? Provide an argument for your answer. (11.4) Edison Chang has the production function . Suppose Edison Chang is in the long run. Calculate Edison Chang’s MRTS -- show all calculations clearly.
Image of page 1

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

View Full Document Right Arrow Icon
University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. 2 ECO 204 Chapter 11: Practice Problems & Solutions for Producer Theory The Basics in ECO 204 (this version 2012-2013) (11.5) A company uses Labor ( ) , Capital ( ) and Materials ( ) as inputs to produce target output q with the production function . (a) For what values of will this company have constant returns to scale? Show your calculations below. (b) For what values of will this company have decreasing returns with respect to materials? Show your calculations below. (11.6) A company uses Labor ( ) and Capital ( ) as inputs to produce target output q with the production function ( ) For what values of will this company have increasing returns to scale? Show your calculations below. (11.7) E-Torre Enterprises used labor ( ) and capital ( ) to produce its target output q according to the production function where and . E-Torre procures labor and capital in competitive markets. Currently, and .
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    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.

    Student Picture

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

  • Left Quote Icon

    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.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    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.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern