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# Problems and Exercises Chapter 5: Elasticity of Demand and Supply 1. (calculating Price Elasticity of Demand) Suppose that 50 units of a good and

1. (calculating Price Elasticity of Demand) Suppose that 50 units of a good and demanded at a price of \$ 1 per units. A reduction in price to \$0.20 results in an increase in quantity demanded to 70 units. Show that these data yield a price elasticity of 0.25. By what percentage would a 10 present rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?

Problems and Exercises Chapter 5: Elasticity of Demand and Supply 1. (calculating Price Elasticity of Demand) Suppose that 50 units of a good and demanded at a price of \$ 1 per units. A reduction in price to \$0.20 results in an increase in quantity demanded to 70 units. Show that these data yield a price elasticity of 0.25. By what percentage would a 10 present rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve? Chapter 7: Production and Cost in the Firm 1. (total Cost and Marginal) Complete the following table, assuming that each unit of labor costs\$75 per day. Quantity of Labor per day Output Per Day Fixed Cost Variable Cost Total Cost Marginal Cost 0 …… \$..... \$..... 1 5 …… 75 …… 2 11 …… 150 450 12.5 3 15 …… …… 525 …… 4 18 …… 300 600 25 5 20 ……. …… …… 37.5 a. Graph the fixed cost, variable cost, and total cost curves for these data. b. What is the marginal product of the third unit of labor? c. What is average total cost when output is 18 units per day?
2.(Long-Run Cost) Suppose the firm has only there possible scales of production ad shown below: a. Which scale of production is most efficient when Q=65? b. Which scale of production is most efficient when Q=75? c. Trace out the long-run average cost curve on the diagram. Chapter 8: Perfect Competition 1.(short –run Profit Maximization) A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firm’s product is \$150 Output FC VC TC TR Profit/Loss 0 \$100 \$0 1 \$100 \$100 2 \$100 \$180 3 \$100 \$300 4 \$100 \$440 5 \$100 \$600 6 \$100 \$780 a. Complete the table. b. At what output rate does the firm maximize profit or minimize loss?
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Quantity of
Labor per
day
0
1
2
3
4
5 Output
Per Day
……
5
11
15
18
20 Fixed Cost 300
300
300
300
300 Variable
Cost Total Cost \$.....
75
150
225
300
375 Marginal
Cost \$300
375
450
525
600
675...

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