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Econ 302 Homework #3 McLeod Due in class Friday March 22nd. Name ______________________________________________________ ID #...

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Econ 302 Homework #3 McLeod Due in class Friday March 22nd. Name ______________________________________________________ ID # ________________________________________________________ Instructions: Please Read Carefully Please print out this form. There should be four separate sheets of paper (including the cover sheet). After you have written your answers, please staple the four sheets together at the top left- hand corner. The first sheet is intended only as a cover sheet. Do not write anything on the first sheet except your name and ID #. Please answer each question on the page provided. If you need extra space, you may use the back of the sheet. There are 50 possible points on this homework assignment. You may work together, but you MUST WRITE UP YOUR OWN WORK and TURN IT IN, IN PERSON, AT THE BEGINNING OF CLASS on Friday, March 22nd. Late homework will not be accepted. PLEASE STAPLE YOUR HOMEWORK!!
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1. (20 points) Suppose honey is produced in a beehive using bees and sugar. Each honey producer uses one beehive which she rents for $20/month. Producing q gallons of honey in one month requires spending 5q dollars bees, and 4q 2 dollars on sugar. a) (5 points) What is the total cost of producing q units of honey for an individual honey producer in a given month? b) (5 points) In general, if the total cost of producing honey is a + bq + cq 2 , then the marginal cost of producing honey is b + 2cq. Assuming each honey producer operates as a price-taker, what is the monthly supply curve for an individual producer? c) (5 points) Let Q be the total market supply, and q is the supply of an individual firm. Therefore, q = Q/n where n is the total number of firms in the market. Suppose the demand for honey is given by Q = 512-4P. Also, suppose there are 50 honey producers in the market. What is the equilibrium price of honey? d) (5 points) How much profit does an individual producer make in a month? Is this a long-run equilibrium? If the answer is yes, simply state that it is a long-run equilibrium. If the answer is no, explain whether or not the equilibrium price will rise or fall.
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Econ 302 Homework #3 McLeod Due in class Friday March 22nd.
Name ______________________________________________________
ID # ________________________________________________________

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