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微观经济学作业答案3.doc

ManagerialEconomics

HOMEWORKSET#3

Name:

Class:

Student#:

（Dueday:

Nextclass）

Part1:

1.Whentheaverageproductisdecreasing,marginalproduct

a. equalsaverageproduct.

b. isincreasing.

c. exceedsaverageproduct.

d. isdecreasing.

e. islessthanaverageproduct.

Choose:

e）

Thenexttwoquestionsrefertoafirminaconstant-costindustrywithATC（q）=2,000/q+100+5qandMC（q）=100+10q.

2.Thelong-runequilibriumpriceequals:

a.$100b.$200c.$300d.$500e.Noneoftheaboveiscorrect.

Choose:

c）FindminimumATCbysettingATC=MC;thisyieldsq=20.Plugq=20intoATCtofindthelong-runequilibriumpriceof$300.

3.Demandforindustryoutputhasjustincreased.Ifthemarketpriceinitiallyrisesto$600,eachfirminthelongrunwillproduce:

a.20unitsb.50units.c.88.7unitd.100units.

e.Moreinformationisneeded.

Choose:

a）Thelong-runequilibriumwillagainhaveeachfirmproducingatminimumATC.Eachfirmproduces20units,asinQuestion3.

4.Astraight-lineisoquant

a. isimpossible.

b. wouldindicatethatthefirmcouldswitchfromoneoutputtoanothercostlessly.

c. wouldindicatethatthefirmcouldnotswitchfromoneoutputtoanother.

d. wouldindicatethatcapitalandlaborcannotbesubstitutedforeachotherinproduction.

e. wouldindicatethatcapitalandlaborareperfectsubstitutesinproduction.

Choose:

e）

5.AfarmerusesMunitsofmachineryandLhoursoflabortoproduceCtonsofcorn,withthefollowingproductionfunctionC=L0.5+M0.75.Thisproductionfunctionexhibits

a. decreasingreturnstoscaleforalloutputlevels

b. constantreturnstoscaleforalloutputlevels

c. increasingreturnstoscaleforalloutputlevels

d. noclearpatternofreturnstoscale

Choose:

b）2L0.5+2M0.75=2C

6.Thedifferencebetweentheeconomicandaccountingcostsofafirmare

a. theaccountant'sfees

b. thecorporatetaxesonprofits

c. theopportunitycostsofthefactorsofproductionthatthefirmowns

d. thesunkcostsincurredbythefirm

e. theexplicitcostsofthefirm

Choose:

c）

7.Priceceilingareinefficientbecause:

a.bothproducersandconsumerslose.

b.Producerslose,consumersmaygainorlose,butalossoccursonnet.

c.Producerslose,consumergain,butalossoccursonnet.

d.Producersandconsumermaygainorlose,butalossoccursonnet.

e.Noneoftheaboveiscorrect.

Choose:

b）Consumersgainfromalowerprice,butlosebecausetheyareabletobuyless.Producesclearlylosefromtheregulatedprice.Thereisalwaysawelfarelossfrompriceceilings（assumingthatthepriceceilingisbinding）.

8.Assumethatafirmspends$500ontwoinputs,labor（graphedonthehorizontalaxis）andcapital（graphedontheverticalaxis）.Ifthewagerateis$20perhourandtherentalcostofcapitalis$25perhour,theslopeoftheisocostcurvewillbe

a. 500.

b. 25/500.

c. 4/5.

d. 25/20or1/4.

Choose:

c）20L+25C=500,C=-4/5L+20

9.Supposethatthepriceoflabor（）is$10andthepriceofcapital（）is$20.Whatistheequationoftheisocostlinecorrespondingtoatotalcostof$100?

a. PL+20PK

b. 100=10L+20K

c. 100=30（L+K）

e. noneoftheabove

Choose:

b）

ThenextthreequestionsrefertothealfalfamarketdescribedinFigure1.

TonsofAlfalfa

（millions）

Price（$/ton）

Figure1

10.Ifthegovernmentpurchasesenoughalfalfatoraisethepricefrom$50/tonto$75/ton,thecostoftheprogramwillbe:

a.$100million.b.$225million.

c.$315million.d.$675million.

e.Noneoftheaboveiscorrect.

Choose:

d）Thegovernmentpays$75/tonforthesurplusof25–16=9milliontons:

75（9）=$675.

11.Ifthegovernmentraisesthepriceto$75/ton,producersurpluswillincreaseby:

a.$400million.b.$500million.

c.$562.5million.d.$1,875million.

e.Noneoftheaboveiscorrect.

Choose:

c）ProducersurplusincreasebytheareaofthetrapezoidbetweenP=$50andP=$75,andQ=20andQ=25million:

$25（20+25）/2=$562.5million.

12.Supposethegovernmentdecidestosupportapriceof$75/tonbypayingproducersnottoproducetheexcesssupplyofalfalfa（whichis25–16=9milliontons）.Theminimumcostofthisprogramwillbe:

a.$157.5million.b.$202.5million.

c.$315million.d.$1,875million.

e.Noneoftheaboveiscorrect.

Choose:

b）Toidleacreage,producersmustbepaidatleasttheshadedareainFigure1:

0.5（25–16）（75-30）=$202.5million.

Price（$/unit）

Ton（millions）

13.Producersurplusinaperfectlycompetitiveindustryis

a. thedifferencebetweenprofitattheprofit-maximizingoutputandprofitattheprofit-minimizingoutput.

b. thedifferencebetweenrevenueandtotalcost.

c. thedifferencebetweenrevenueandvariablecost.

d. thedifferencebetweenrevenueandfixedcost.

e. thesamethingasrevenue.

Choose:

c）

Part2:

Afirm'stotalcostfunctionisgivenbytheequation:

TC=4000+5Q+10Q2.

（1）Writeanexpressionforeachofthefollowingcostconcepts:

a.TotalFixedCost

b.AverageFixedCost

c.TotalVariableCost

d.AverageVariableCost

e.AverageTotalCost

f.MarginalCost

（2）Determinethequantitythatminimizesaveragetotalcost.Demonstratethatthepredictedrelationshipbetweenmarginalcostandaveragecostholds.

Solution:

PART

（1）

PART

（2）

ATCisminimizedwhereMCisequaltoATC.

EquatingMCtoATC

ATCisminimizedat20unitsofoutput.Upto20,ATCfalls,whilebeyond20ATCrises.

MCshouldbelessthanATCforanyquantitylessthan20.

Forexample,letQ=10:

MC=5+20（10）=205

MCisindeedlessthanATCforquantitiessmallerthan20.

MCshouldexceedATCforanyquantitygreaterthan20.

Forexample,letQ=25:

MC=5+20（25）=505

MCisindeedgreaterthanATCforquantitiesgreaterthan20.

Part3:

TheCumminsEngineCo.isasuccessfulproducerofdieselenginesfortrucks.Thispartexaminesthefirm'scostdataandfillintheblanksandthenfindtheprofitmaximizing（orlossminimizing）outputlevelwhenP=$150.Pleaseexplainyourdecision.

Output

Revenue

R（$150*q）

TotalCost

Profit

Average

TotalCost

ATC

Average

VariableCost

AVC

MarginalCost

2,100

161.54

n.a.

2,245

160.36

145

2,400

160.00

155

2,565

160.31

165

2,740

161.18

175

Answer:

Output

Revenue

TotalCost

Profit

1,950

2,100

-150

2,100

2,245

-145

2,250

2,400

-150

2,400

2,565

-165

2,550

2,740

-190

Theprofitmaximizingoutputlevelisq=14.Ifitexpandsoutputbyoneunitto15units,itwilltakeinanadditional$150inrevenue,butitwillpayanadditional$155inproductioncosts.So,expandingoutputto15unitswillcausethefirmtoloseanextra$5inprofits.Likewise,ifitreducesitsoutputbyoneunitto13,itsaves$145incosts,butitgivesup$150inrevenue.Thus,profitwouldfallby$5comparedwithproducing14unitsofoutput.Althoughprofitsarenegative（-$145）,itisclearthatlooseswillbeminimizedatq=14.

Part4:

BudOwenoperatesBud'sPackageStoreinasmallcollegetown.Budsellssixpacksofbeerforoffpremisesconsumption.Budhasverylimitedstorespaceandhasdecidedtolimithisproductlinetoonebrandofbeer,choosingtoforegothesnackfoodlinesthatnormallyaccompanyhisbusiness.Bud'sistheonlybeerretailerphysicallylocatedwithinthetownlimits.Hefacesconsiderablecompetition,however,fromsellerslocatedoutsideoftown.Budregardsthemarketashighlycompetitiveandconsidersthecurrent$2.50persixpacksellingpricetobebeyondhiscontrol.Bud'stotalandmarginalcostfunctionsare:

TC=2000+0.0005Q2

MC=0.001Q,

whereQreferstosixpacksperweek.Includedinthefixedcostfigureisa$750perweeksalaryforBud,whichheconsiderstobehisopportunitycost.

a.CalculatetheprofitmaximizingoutputforBud.Whatishisprofit?

Isthisaneconomicprofitoranaccountingprofit?

b.Thetowncouncilhasvotedtoimposeataxof$.50persixpacksoldinthetown,hopingtodiscouragebeerconsumption.WhatimpactwillthetaxhaveonBud?

ShouldBudcontinuetooperate?

WhatimpactwillthetaxhaveonBud'soutoftowncompetitors?

Solution:

Giventhecompetitivenatureofthemarket,BudshouldequatePtoMC.

Sincethecostfunctionisaneconomiccostfunction,wecanconcludethatthisisaneconomicprofit.

Taxshiftstotalcostcurveto:

TC=2000+0.0005Q2+0.5Q

MCbecomes

MC=0.001Q+0.5

settingP=MC

Giventhatthisiszeroeconomicprofit,Budshouldcontinueoperating.

TheimpactuponBud'scompetitorswillbefavorableorneutral.Ashecurtailsoutput,500sixpacksworthofbusinesswilleithershiftelsewhereorchoosetemperance.

Part5:

Themarketforcollegehockeyplayersischaracterizedbythefollowingsupplyanddemandcurves,whereQisthenumberofathletesandPistheweeklywageinexcessoftheirscholarshippayments:

QD=1,600–20P,

QS=-900+30P.

a.Supposethereisacompletelyfreemarket.Whatistheequilibriumweeklywage?

Howmanyathletesarehired?

b.NowsupposethatNationalCollegiateAthleticAssociation（NCAA）stepsinanddecidestocrackdownonpaymentstoplayers.TheNCAAisbotherednotbytheexistenceofthesepayments,butbytheirl

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