ECON 110 Connect Homework 3 Supply Decisions Competition Assignment solutions complete answers

ECON 110 Connect Homework 3 Supply Decisions Competition Assignment solutions complete answers 

 

Question 1

In the table below, calculate the marginal physical product of each successive worker and answer two questions about production. 

  

a. Calculate the marginal physical product of each successive worker.

  

Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.

 

Question 2

Given the following production function for the mythical Tight Jeans Corporation, calculate the marginal physical product, graph the production function and the marginal physical product on two separate graphs, then answer three questions about marginal productivity.

 

 a. Calculate the marginal physical product.

  

Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.

 

b. Graph the production function.

Instructions: Use the tool provided 'PF' to plot the line point by point (plot 9 points total).

   

c. Graph marginal physical product.

  

Instructions: Use the tool provided 'MPP' to plot the line point by point (plot 8 points total).

At what level of employment does

d. The law of diminishing returns become apparent?

e. MPP hit zero?

f. MPP become negative?

 

Question 3

Given the following production function for the mythical Tight Jeans Corporation, calculate the marginal physical product and the value of the marginal physical product. Note the value of the marginal physical product is the price of the product multiplied by the marginal physical product. Assume a price of $30 per pair of jeans. 

 

Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.

 

Question 4

Refer to the cost table below and answer two questions about profit. 

 

Compute total profits at a price of $15 per pair of jeans and output of

a. 40 pairs

b. 50 pairs

 

Question 5

Policy Perspectives

If the world's population is growing by 1 percent a year,

a. How fast does production have to increase to keep living standards from falling? 

b. How will living standards change if the workforce and productivitiy (MPP) also increase by 1 percent each year? 

 

Question 6

Use the figure showing an individual catfish farmer to answer three questions.

 

If feed prices were to fall,

a. which curve would be affected and (b) how would it change?

c. how would the profit-maximizing rate of output change?

The profit-maximizing rate of output would.

 

Question 7

The graph shows a situation where the typical catfish farmer is incurring a loss at the prevailing market price P 1. Use this graph to answer four questions about catfish farmers and the catfish market. 

 

a. At the best possible rate of output, marginal cost (MC) is equal to

b. Is average total cost (ATC) above, below, or equal to price (P)?

c. Which of the following would raise the market price?

d. What price would prevail in long-run equilibrium?

 

Question 8

Given the following information about a competitive firm's costs, calculate marginal cost and answer three questions. 

 

Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.

 

If the prevailing market price is $14 per unit, how much should the firm produce?

How much profit will it earn at that output rate?

If the firm increases output by 2 units, will it make more profit or less?

 

Question 9

Refer to the News Wire and answer the following questions.

NEWS WIRE
COMPETITIVE PRESSURE
The T-Shirt Business: Too Much Competition

At first blush, the T-shirt business looks like a sure thing. All you need is a bunch of blank T-shirts, a wall full of jazzy transfers, and a heat press. You can buy blank shirts for as little as $1.60 apiece and stock transfers for $1.50 a shot. That's a $3.10 investment. Sell the shirt for $15 and you've got a nice, fat profit margin. What could be easier?

Trouble is, everyone knows the formula. In fact there are dozens of websites that offer not only the necessary supplies, but also sage advice on how to set up your T-shirt shop, either online or in a real store. They all promise you can get rich selling T-shirts.

T-shirt shop owners aren't so sanguine about getting rich. Quite simply, there are far too many T-shirt shops and online outlets. The competition is fierce. So T-shirt shops have to battle for customers every day. As a shop owner in South Padre Island lamented, "Every day you have to compete with other shops. And if you invent something new, they will copy you."

Source: Industry websites and news, 2015.

Using the information contained in the News Wire above along with the following cost data and sales numbers, calculate revenue, cost, and profit for a T-shirt shop.

Rent = $200.00 per day

Labor cost = $5.00 per shirt

Output (sales) = 40 shirts per day

Instructions: Round your response to one decimal place.

a. Total revenue per day

b. Average total cost

c. Per unit profit

d. Total profit per day

 

Question 10

Policy Perspectives

 

Suppose that the monthly market demand schedule for Frisbees as well as the marginal and average costs of Frisbee production for every competitive firm are given in the following table. Graph the market demand curve and identify the market equilibrium, graph the firm's cost curves, and then answer five questions about production and profit. Finally, assume that the equilibrium market price is $6 per Frisbee.

 

Monthly Market Demand Schedule for Frisbees

 

Monthly Firm Output, Marginal Cost, and Average Total Cost

 

a. Graph the market demand curve and identify the equilibrium price and quantity.

b. Graph the firm's cost curves. 

Instructions: In the left graph, use the tool provided 'Demand' to plot the market demand curve (plot 7 points total). Then using the tool provided 'E' identify the equilibrium price and quantity. In the right graph, use the tools provided 'MC' and 'ATC' to plot the firm's marginal cost and average total cost curves (plot 6 points for each curve, 12 points total). 

 

c. How many Frisbees are being sold in equilibrium?

d. How many (identical) firms are initially producing Frisbees?

e. How much profit is the typical firm making?

In view of the profits being made, more firms will want to get into Frisbee production. In the long run, these new firms will shift the market supply curve to the right and push the price down to average total cost, thereby eliminating profits.

f. At what equilibrium price are all profits eliminated?

g. How many firms will be producing Frisbees at this price?