Mock Final Exam answers

Production andrew sells cats his business employs both

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Unformatted text preview: b. "The more equipment we buy, the less useful each additional unit of equipment is to us." c. "Even if we expend all of our inputs by the same percentage, our production will grow by a lesser percentage." d. "We should sell different cats to different people at different prices!" e. "If we increase our price slightly, we can earn even higher revenue." 6. Cost: Half of Andrew's employees have gone on a strike. However, under the Labor Relations Code of BC, Andrew is not allowed to replace these workers with someone else. If wage rate is $20/hour and capital rental rate is $10/hour, which of the following production function allows Andrew to continue the same level of output at no additional cost? a. Q=3L+2K b. Q=2L+3K c. Q=4L+10K d. Q=L3K e. Q=2LK0.5 7. Profit Maximization: Ratna & Co. produces Pokmon supplies, which is a perfectly competitive market. The original (inverse) market demand is given by P=88-3Q. However, due to poor market conditions, the demand has declined sharply. If the cost function of Ratna & Co. is always C=10+40Q+0.5Q2, how much does the demand have to drop to shut down its operation? a. >15 b. >30.112 c. >44.472 d. >50.327 e. The company already operates below shutdown point. 8. Perfect Competition: Which of the following is a perfectly competitive market? a. Jonathan is playing with Fred, and Fred doesn't want to play with Jonathan anymore. However, Jonathan locked all his doors and doesn't let Fred leave. b. Bob wants to sell his U-pass, but he is caught by Jeff Chen. c. Andrew sells cats, Annie sells dogs. Dogs and cats are homogeneous products. d. Jonathan has a lemonade stand. It is the only lemonade stand in his neighborhood. e. Lisa sells her textbook at a price higher than her marginal cost. 9. Monopoly: Somehow Andrew gained monopoly over the cat market, where the demand is represented by Q=10-P/3, and Andrew has cost function given by C=50+5Q+Q2, where Q is in thousands of cats, and P is in thousands of dollars. How much should Andrew charge per cat...
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