The following table gives information about a firm’s short-run cost function in a perfectly competitive industry – candy manufacturing. a) What quantity will the firm supply when price of candy is $2? When price is $5? When price is $8? b) Consider the case where price = $2. Suppose that you have been renting capital (a candy-making machine) for a long time under a long-run capital rental agreement, but now the rental contract is about to expire. Should you renew your capital rental contract or not? Explain why or why not. How would your answer change if price is $5? How would your answer change if price is $8? Quantity Total Cost Average Variable Cost Average Total Cost Marginal Cost 0 10       1 15 5 15 5 2 17 3.5 8.5 2 3 18 2.66667 6 1 4 20 2.5 5 2 5 25 3 5 5 6 33 3.83333 5.5 8

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Question 3 Mr. Stonewall has to set up a firm that produces calculators competing with the likes of Casio and Sharp calculators. In order for to estimate the amount of labour and capital needed to maximise profit in the long run, Mr. Stonewall has employed you to help him in this regard. Currently, the competitive wage rate is set at ¢4 per unit of labour and capital is rented at ¢5 per unit. The forces of demand and supply in the industry has also set the equilibrium price of calculators at ¢0.8 per unit. Suppose the production function of Mr. Stonewall's firm is given as Q 20K0.5 LO.5 + 7.5 and the firm total cost of production is ¢1690. Find the optimal levels of capital and labour needed to optimize output. The maximum profit of the firm at the optimal levels of labour and capital. 11.

Question 5: Suppose a brewery uses a Cobb-Douglas production function for his production. He studies the production process and finds the following. An additional machine-hour of fermentation capacity would increase output by 500 bottles per day (i. e. MPK = 500). An additional man-hour of labor would increase output by 1000 bottles per day (i. e. MPL = 1000). The price of a man- hour of labor is $50 per hour. The price of a machine-hour of fermentation capacity is $5 per hour. 1. Is the brewery currently minimizing its cost of production? Check using the minimization condition. 2. It turns out, the brewery is not optimally chossing the factors of production. To lower its production cost, which factor of production should the brewery increase and which factor should he decrease? 3. Suppose that the price of a machine-hour of fermentation capacity rises to $25 per hour. How does this change the answer from part 1?

A competitive firm produces output using three fixed inputs and one variable input. The firm’s short-run production function is q = 200x − 3x^2, where x is the amount of variable input used. The price of the output is $5 per unit and the price of the variable input is $10 per unit. In the short run, how many units of x should the firm use?

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Demand for microprocessors is given by P = 35 – 5Q , where Q is the quantity of microchips (in millions). The typical firm’s total cost of producing a chip is Ci = 5qi­, where qi is the output of firm i. a) Does the typical microchip firm display increasing, constant, or decreasing returns to scale? What would you expect about the real microchip industry? In general, what must be true about the underlying technology of production for competition to be viable?

Yuri has been offered a job with a weekly wage of $800. Yuri declines the offer and starts a tutoring business of his own. He rents a classroom for $200/week. Additional material costs are $5 per student per one-hour tutorial. Tuition is $30 per student per tutorial (regardless of the size of the tutorial class). 3a) What is the weekly accounting profit function for Yuri's business? 3b) What is the weekly economic profit function for his business? - --- ---- 3c) What is the economic breakeven number of tutorial hours per week?

1. Suppose that a profit-maximizing firm, operating in a perfectly competitive market, uses the following production function:F(L,K)  = L^1/2 + 2(K^1/2) where L are the units of labor and K the units of capital. Suppose further that in order to operate, the firm must pay the government a fixed value patent of $ 50, no matter how much it decides to produce. Finally, consider that the factor price is given by w = 1 and r = 4, respectively.(a) Calculate the TMST, placing L on the x-axis. What value does the TMST take when L = 0, and what value does it take when K = 0? Explain if you can orthere are no corner solutions to the cost minimization problem.(b) Find the conditional demands L (q) and K (q), and the cost function C (q) in the long run.2. A company has a production function equal to f (L, K) = 2L + βK. Suppose that the firm currently achieves a level of production equal to q0, using for this a certain amount of capital and labor.(a) If the firm wanted to decrease the amount of…

Suppose that you are one of rubber producers (sellers) in the perfectly competitive market in Thailand. Make it simple: suppose there are two types of used inputs consisting of land and workers. Assume that, in short-run production, you operate on a fixed size of a land and the cost of renting the land is 2 Baht per day.  The table (A) below shows the relationship between the quantity of rubber produced by your company per day and costs of workers per day. The goal of your firm is to maximize (minimize) profits (losses).Table (A) The Quantity of rubber (units) produced per day Costs of workers per day in baht ATC AVC MC 0 0       1 5       2 9       3 12       4 14       5 15       6 18       7 22       8 27       9 33       10 40                   Answer the following questions  1. Filling in Table (A) above for ATC, AVC and MC from 0 to 10 units.  2. Using economics analysis, suppose the market price of the rubber in Thailand is 3.5 Baht per unit, how…