1. Pete's Choppers Company's cost data have been partially entered in the table. Following the arrest of the company's accountant, you are called to fill in the missing entries:
|
Output
|
TC
|
FC
|
VC
|
ATC
|
AVC
|
AFC
|
MC
|
|
0
|
3000
|
|
|
-
|
-
|
-
|
-
|
|
1
|
|
|
|
|
|
|
2400
|
|
2
|
|
|
5600
|
|
|
|
|
|
3
|
14000
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
8100
|
|
5
|
|
|
|
|
6200
|
|
|
|
6
|
|
|
|
8000
|
|
|
|
2. Kobe's production function for mini-basketball hoops is Q = LK. The price of labor services is w and the price of capital services is r. Suppose that w = $4, r = $2, and Kobe's total cost is $160.
(a) What is Kobe's MPL and MPK?
(b) What is Kobe's optimal input combination of L and K? What is Q?
(c) Suppose the wage rate is 8 times the rental rate and Q is the same as before. What is Kobe's optimal input combination of L and K after the price change?
3. Suppose that each firm in a perfectly competitive industry has the short-run cost function C = 5 + q + 2q2, and the market price is $45. What is the profit-maximizing output level for each firm? What is the total revenue? What are the profits?
4. Suppose that a perfectly competitive firm's total cost of producing output q is TC (q) = 10+10q-q2 +0.25q3 and market price P*=$10.
(a) Find the short-run supply curve of a firm in this industry.
(b) How much will the firm produce at P*=$10?
5. Crystal skulls are produced in a perfectly competitive industry in which each firm has a total cost function TC = 4r + wq2/4, where r is the price of a barrel of oil and w is the price of a barrel of water. Suppose that the crystal skull industry is in long-run equilibrium, with r = $25 and w = $1. What is the market price of a crystal skull? How many skulls does each firm produce?