ECO Assignment 4
Wednesday, 27 November 2024
11:16 AM
1 a.
B. It exhibit diminishing returns to labor because any
additional amount of workers result to a decrease in
the number of output which is the number of chairs.
This is seen from the decrease of MPL from 10 to -3.
C. The marginal product of labor become negative
because the extra number of worker is making the
production of chairs inefficient as the workplace may
be too small to accommodate more than 5 worker
which hinder the production rather than help.
2a.
Flight Time Average cost per passenger
7 AM
$50,000 / 240 = $208.33
10 AM
$50,000 / 120 = $416.67
1 PM
$50,000 / 120 = $416.67
4 PM
$50,000 / 240 = $208.33
B. As a newly hired marketing consultant, I would focus on
attracting off-peak customers as the flights are only half full
which mean there is still space to increase revenue and
sales while the rush-hour flights are fully filled. I would
recommend the airline to provide a promotional activity by
lowering the price of the airline ticket to increase sales as
consumer’s willingness to pay for the off-peak flights might
be in the lower range compared to the rush-hours.
3a. Total cost = Fixed cost + Variable costs
TC = 300 + 55(q)
TC = 300 + 55 (0)
TC = 300
The fixed cost is $300,000
B. TC = 300 + 55(100)
TC = 300 + 5500
AVC = VC / q
AVC = 5500 / 100
AVC = 55 (thousand dollar per thousand units)
C. MC = 55(100) - 55(99) / 100-99 = 55
Marginal cost of production at 100 thousand units is
55 (thousand dollar per thousand units)
D. AFC = FC / q
AFC = 300,000 / 100,000
AFC = 3 (thousand dollar per thousand units)
E. TC = 350 + 45(q) + 3(i)
4a.
5a.
Fixed cost = $50
Variable cost = $0.5q^2
B. Average total cost = Total cost / Quantity
C. Average total curve is at its minimum when quantity
is at 10. The marginal cost is 10 and the average total
cost is also 10.
D. QS = p|p≥10
E. QS = 9P
F.
G.
H. In the short run, there is incentive for forms to enter
since profit is bigger than zero. However, in the long
run, profit will return to zero since supply increases
due to firms entering the market.
I. In the long run, profit always equal to zero
J.
6a. Qd = Qs
B. I would expect to see entry into the industry because
TR > TC which shows economic profit. This shows that
it gives an incentive for firm to enter. The effect is it
will shift short run supply curve to the right, decrease
price and minimize profit. Eventually, it will lead to
zero economic profit and slow down incentive for
firms to enter.
C.
P=ATC
ATC=MC
D. P=AVC
The lowest price the firm would sell its output is at 0.005
because it is the shutdown price, firm will keep on
producing as long as price is bigger or equal to the average
variable cost. Therefore at that price, firm is experiencing a
negative of 722 in profit.
7a.
B.
The price ceiling imposed by the government reduces the
degree of monopoly from 29.4% to 14.3%. This regulation
increases output and lower prices paid by the consumer
which improves consumer welfare due to increased
consumer surplus and quantity supplied to the market. But
this limits monopolists’s ability to exploit its market power.
C. The price ceiling that will lead to the largest level of
output is when price is equal to ac which is at $
8a.
B.