Tim is a baker who produces doughnuts. He can access labour at a rate of $2 per hour, and capital at a rate of $0.25 per machine hour. He produces doughnuts according to Q = L + Kº.5. If the bakery is operating with an optimal factor allocation, and producing 40 doughnuts per day, determine the average total cost of a doughnut. The bakery employs one worker, Anil, who consumes doughnuts (d) and other goods (y) with utility U(d,y) = edy. (Assume y is the Marshallian good, with Py=$1). • • Sketch Anil's utility curve, and his budget, which is the pay he receives from his job. Do Anil's preferences satisfy the rules of preference ordering? Are there any constraints on his consumption of either good? • Derive the supply and demand curves based on Anil's individual demand, and Tim's costs of production.

Tim is a baker who produces doughnuts. He can access labour at a rate of $2 per hour, and capital at a rate of $0.25 per machine hour. He produces doughnuts according to Q = L + Kº.5. If the bakery is operating with an optimal factor allocation, and producing 40 doughnuts per day, determine the average total cost of a doughnut. The bakery employs one worker, Anil, who consumes doughnuts (d) and other goods (y) with utility U(d,y) = edy. (Assume y is the Marshallian good, with Py=$1). • • Sketch Anil's utility curve, and his budget, which is the pay he receives from his job. Do Anil's preferences satisfy the rules of preference ordering? Are there any constraints on his consumption of either good? • Derive the supply and demand curves based on Anil's individual demand, and Tim's costs of production.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter7: Production And Cost In The Firm

Section7.A: Appendix: A Closer Look At Production And Cost

Problem 1AQ

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