04 Jun Question Click the link above to submit the assignment.
Question
Click the link above to submit the assignment.
Week 4 Homework Problems:
Chapter 7: 7.2(a-e), 7.4(a-c), 7.5(a-d), 7.7(a-d), 7.10(a-d)
Note: Homework problems are worth 2 points for each part of the problem.
Problem 7.2
Suppose that the Acme Gumball Company has a fixed proportions production function that requires it to use two gumball presses and one worker to produce 1000 gumballs per hour.
a. Explain why the cost per hour of producing 1000 gumballs is 2v + w (where v is the hourly rent for gumball presses and w is the hourly wage).
b. Assume Acme can produce any number of gumballs they want using this technology
Proble7.4
2. Trapper Joe, the fur trader, has found that his production function in
p
acquiring pelts is given by q = 2 H where q =the number of pelts acquired
in a day, and H =the number of hours Joe employees spend hunting and
s
trapping in one day. Joe pays his employees $8 an hour.
a) Calculate Joe total and average cost curves (as a function of q).
s
b) What is Joe total cost for the day if he acquires four pelts? Six
s
pelts? Eight pelts? What is Joe average cost per pelt for the day if he
s
acquires four pelts? Six pelts? Eight pelts?
c) Graph the cost curves from part a and indicate the points from part
b.
Problem 7.5
A firm producing hockey sticks has a production function given by
q = 2 ?K ? L
In the short run, the firm’s amount of capital equipment is fixed at K = 100. The rental rate for K is v = $1, and the wage rate for L is w = $4.
a. Calculate the firm’s short-run total cost function. Calculate the short-run average cost function.
b. The firm’s short-run marginal cost function is given by SMC = q/50. What are the STC, SAC, and SMC for the firm if it produces 25 hockey sticks? Fifty hockey sticks? One hundred hockey sticks? Two hundred hockey sticks?
c. Graph the SAC and the SMC curves for the firm. Indicate the points found in part b.
d. Where does the SMC curve intersect the SAC curve? Explain why the SMC curve will always intersect the SAC at its lowest point.
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