ECONOMICS
1010 B
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PROBLEM # 4
J. ALLEN
Spring, 2006
Given the following production function for a single corn farm:
UNITS
Variable Input
0
OUTPUT
(bu of corn)
0
MPP
APP
MRP
0
0
0
1
50
_______
_______
_______
2
110
_______
_______
_______
3
180
_______
_______
_______
4
260
_______
_______
_______
5
350
_______
_______
_______
6
450
_______
_______
_______
7
540
_______
_______
_______
8
620
_______
_______
_______
9
690
_______
_______
_______
10
750
_______
_______
_______
11
800
_______
_______
_______
12
840
_______
_______
_______
13
870
_______
_______
_______
14
890
_______
_______
_______
15
900
_______
_______
_______
16
900
_______
_______
_______
17
890
_______
_______
_______
18
870
_______
_______
_______
19
840
_______
_______
_______
20
800
_______
_______
_______
FARM
DEMAND
W
MARKET
DEMAND
_______
8
_______
_______
7
_______
_______
6
_______
_______
5
_______
_______
4
_______
_______
3
_______
_______
2
_______
_______
1
_______
A.
Fill in the values of MPP and APP with the correct values.
B.
All corn can be sold at a world price of $.10 per bushel.
1.
Fill in the values of MRP in column 5 and find individual “farm demand”.
2.
The entire national economy is 1000 corn farms. All corn can be sold at a world price of $.10 per bushel. Fill in
the values of “market demand”.
3.
The supply of labour is constant at 12,000 workers. Find the equilibrium national wage.
C.
The opportunity cost of one unit of Variable Input is 40 bu of corn.
1.
What is the efficient number of units of variable input to use in this production process?
2.
If the fixed inputs are private property, what is the profit maximizing number of units of variable input to employ?
3.
If the fixed inputs are common property, how many units of variable inputs will be put in this production process?
4.
What is the social loss if the fixed inputs are common property?