微观经济学作业答案3教学教材

Managerial EconomicsHOMEWORK SET#3 Name:Class:Student #:(Due day: Next class)Part 1:1. When the average product is decreasing, marginal producta. equals average product.b. is increasing.c. exceeds average product.d. is decreasing.e. is less than average product.Choose: e)The next two questions refer to a firm in a constant- cost industry with ATC(q) = 2,000/q + 100 + 5q and MC(q) = 100 + 10q.2. The long-run equilibrium price equals:a. $100b. $200c. $300d. $500e. None of the above is correct.Choose: c) Find minimum ATC by setting ATC = MC; this yields q = 20. Plug q = 20 into ATC to find the long-run equilibrium price of $300.3.Demand for industry output has just increased. If the market price initially rises to $600, each firm in the long run will produce:a. 20 unitsb. 50 units.c. 88.7 unitd. 100 units.e. More information is needed.Choose: a) The long-run equilibrium will again have each firm producing at minimum ATC. Each firm produces 20 units, as in Question 3.4. A straight-line isoquanta. is impossible.b. would indicate that the firm could switch from one output to another costlessly.c. would indicate that the firm could not switch from one output to another.d. would indicate that capital and labor cannot be substituted for each other in production.e. would indicate that capital and labor are perfect substitutes in production. Choose: e)5. A farmer uses M units of machinery and L hours of labor to produce C tons of corn, with the following production function C = L0.5 + M0.75. This production function exhibitsa. decreasing returns to scale for all output levelsb. constant returns to scale for all output levelsc. increasing returns to scale for all output levelsd. no clear pattern of returns to scaleChoose: b) 2L0.5+2M0.75=2C6. The difference between the economic and accounting costs of a firm area. the accountant's feesb. the corporate taxes on profitsc. the opportunity costs of the factors of production that the firm ownsd. the sunk costs incurred by the firme. the explicit costs of the firmChoose: c)7. Price ceiling are inefficient because:a. both producers and consumers lose.b. Producers lose, consumers may gain or lose, but a loss occurs on net.c. Producers lose, consumer gain, but a loss occurs on net.d. Producers and consumer may gain or lose, but a loss occurs on net.e. None of the above is correct.Choose: b) Consumers gain from a lower price, but lose because they are able to buy less. Produces clearly lose from the regulated price. There is always a welfare loss from price ceilings ( assuming that the price ceiling is binding).8. Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental cost of capital is $25 per hour, the slope of the isocost curve will bea. 500.b. 25/500.c. 4/5.d. 25/20 or 1/4.Choose: c) 20L+25C=500, C=-4/5L+209. Suppose that the price of labor ( ) is $10 and the price of capital ( ) is $20. What is the equation of the isocost line corresponding to a total cost of $100?a. PL + 20PKb. 100 = 10L + 20Kc. 100 = 30(L+K)d. ()P P++10030L Ke. none of the aboveChoose: b)The next three questions refer to the alfalfa market described in Figure 1.Price ($/ton)Figure 110. If the government purchases enough alfalfa to raise the price from $50/ton to $75/ton, the cost of the program will be:a. $100 million.b. $225 million.c. $315 million.d. $675 million.e. None of the above is correct.Choose: d) The government pays $75/ton for the surplus of 25 –16 = 9 million tons: 75(9) = $675.11. If the government raises the price to $75/ton, producer surplus will increase by:a. $400 million.b. $500 million.c. $562.5 million.d. $1,875 million.e. None of the above is correct.Choose: c) Producer surplus increase by the area of the trapezoid between P = $50 and P = $75, and Q = 20 and Q = 25 million: $25(20 + 25)/2 = $562.5 million.12. Suppose the government decides to support a price of $75/ton by paying producers not to produce the excess supply of alfalfa (which is 25 – 16 = 9 million tons). The minimum cost of this program will be :a. $157.5 million.b. $202.5 million.c. $315 million.d. $1,875 million.e. None of the above is correct.Choose:b) To idle acreage, producers must be paid at least the shaded area in Figure1: 0.5(25 –16 )(75-30) = $202.5 million.13.Producer surplus in a perfectly competitive industry isa. the difference betweenprofit at the profit-maximizing output and profit at the profit-minimizing output.b. the difference between revenue and total cost.c. the difference between revenue and variable cost.d. the difference between revenue and fixed cost.e. the same thing as revenue. Choose:c)Part 2:A firm's total cost function is given by the equation:TC = 4000 + 5Q + 10Q 2.(1) Write an expression for each of the following cost concepts: a. Total Fixed Cost b. Average Fixed Cost c. Total Variable Cost d. Average Variable Cost e. Average Total Cost f. Marginal Cost(2) Determine the quantity that minimizes average total cost. Demonstrate that the predicted relationship between marginal cost and average cost holds.Solution: PART (1) a.TFC 4000= b.Q4000AFC =c.TVC TC TFC TVC Q Q =-=+5102d.Q 105Q10Q 5Q Q TV C AV C 2+=+==e.ATC TC Q 40005Q 10Q Q2==++ f.MC 520Q =+PART (2)ATC is minimized where MC is equal to ATC. Equating MC to ATC 40005Q 10Q Q 520Q40005Q 105Q 20Q 400010Q Q 400Q 2022222++=+++=+===ATC is minimized at 20 units of output. Up to 20, ATC falls, while beyond 20 ATC rises.MC should be less than ATC for any quantity less than 20. For example, let Q = 10: MC = 5 + 20(10) = 205 ()()5051010101054000ATC 2=++=MC is indeed less than ATC for quantities smaller than 20. MC should exceed ATC for any quantity greater than 20. For example, let Q = 25: MC = 5 + 20(25) = 505 ()()4152525102554000ATC 2=++=MC is indeed greater than ATC for quantities greater than 20.Part 3:The Cummins Engine Co. is a successful producer of diesel engines for trucks. This part examines the firm 's cost data and fill in the blanks and then find the profitmaximizing (or loss minimizing) output level when P=$150. Please explain yourAnswer:15 units, it will take in an additional $150 in revenue, but it will pay an additional $155 in production costs. So, expanding output to 15 units will cause the firm to lose an extra $5 in profits. Likewise, if it reduces its output by one unit to 13, it saves $145 in costs, but it gives up $150 in revenue. Thus, profit would fall by $5 compared with producing 14 units of output. Although profits are negative (-$145), it is clear that looses will be minimized at q = 14.Part 4:Bud Owen operates Bud's Package Store in a small college town. Bud sells six packs of beer for off-premises consumption. Bud has very limited store space and has decided to limit his product line to one brand of beer, choosing to forego the snack food lines that normally accompany his business. Bud's is the only beer retailer physically located within the town limits. He faces considerable competition, however, from sellers located outside of town. Bud regards the market as highly competitive and considers the current $2.50 per six pack selling price to be beyond his control. Bud's total and marginal cost functions are:TC = 2000 + 0.0005Q2MC = 0.001Q,where Q refers to six packs per week. Included in the fixed cost figure is a $750per week salary for Bud, which he considers to be his opportunity cost.a. Calculate the profit maximizing output for Bud. What is his profit? Is this an economic profit or an accounting profit?b. The town council has voted to impose a tax of $.50 per six pack sold in the town, hoping to discourage beer consumption. What impact will the tax have on Bud? Should Bud continue to operate? What impact will the tax have on Bud's out-of-town competitors?Solution: a.Given the competitive nature of the market, Bud should equate P to MC. 2.50 = 0.001Q Q = 2500TR = 2.5 x 2500 = 6250TC = 2000 + 0.0005(2500)TC = 2000 + 3125TC = 5125 = 6250 - 5125 = 1,1252ππ Since the cost function is an economic cost function, we can conclude that this is an economic profit.b.Tax shifts total cost curve to:TC = 2000 + 0.0005Q 2+ 0.5Q MC becomesMC = 0.001Q + 0.5 setting P = MC $2.50 = 0.001Q + 0.52.00 = 0.001Q Q = 2000TR = 2.50 x 2000TR = 5000TC = 2000 + 0.0005(2000)2 + 0.5(2000)TC = 2000 + 2000 + 1000TC = 5000= 5000 - 5000 = 0ππGiven that this is zero economic profit, Bud should continue operating.The impact upon Bud's competitors will be favorable or neutral. As he curtails output, 500 six packs worth of business will either shift elsewhere or choose temperance.Part5:The market for college hockey players is characterized by the following supply and demand curves, where Q is the number of athletes and P is the weekly wage in excess of their scholarship payments:QD = 1,600 – 20P,QS = -900 + 30P.a. Suppose there is a completely free market. What is the equilibrium weekly wage? How many athletes are hired?b. Now suppose that National Collegiate Athletic Association (NCAA) steps in and decides to crack down on payments to players. The NCAA is bothered not by the existence of these payments, but by their level, so the NCAA restricts players to be paid no more than $35/week above the scholarship payment. How many athletes are now hired?c. What is the change in producer surplus (i.e., the players' surplus) as a result of the price control?d. How much do schools now spend on players in comparison to the free market equilibrium?e. What is the deadweight loss of the price ceiling?Answer:a)Setting QD = QS yields 1600 – 20P = -900 + 30P or P* = $50 and Q* = 600.b)If Pmax = $35, QS = -900 + 30(35) = 150. (Since Pmax > P*, there will be excessdemand at this price, so the quantity supplied is the quantity traded, and 150 athletes will be hired.)c)In Figure 3, the change in producer surplus is the area of the trapezoid beef.This area equals ($50 -$35)(150 + 600)/2 = $5,625.d) The schools now spend $35(150) = $5,250 per week on players, compared to $50(600)= $30,000 before.e) Deadweight loss is the area of the triangle hef. At Q = 150, the price on thedemand curve is $72.50 (since 1,600 – 20(72.5) = 150). The area equals 1/2($72.5 -$35)(600 – 150) = $8,437.5。