Question 1: The following table shows part of the demand for tickets to a local sporting event:
Price(P)...Quantity(Q)
15...........40
10..........100
6............150
3............250
a. Is demand elastic in the $3 - $6 price range?
b. Ed = 0.8 in the $6 - $10 price range. In this range of demand, by what percentage would quantity demanded change if price changes by 5 percent?
c. Price falls from $15 to $10. Does total revenue (TR) increase, decrease, or remain the same?
Question 2: For a given labor supply, would the potential unemployment impact of an increase in the minimum wage be greater in the case of elastic or inelastic demand for labor? Explain why, using hypothetical numbers to illustrate your case.
Question 3: You have been hired to manage a small manufacturing facility which has cost and production data given in the table below.
No. of workers Total Labor Cost Output Total Revenue
1 $45 100 $170
2 90 108 350
3 135 114 800
4 180 119 1270
5 225 123 1600
6 270 125 1700
7 315 126 1750
a. What is the marginal product of the sixth worker?
b. What is the marginal revenue product of the third worker?
c. What is the marginal cost of the third worker?
d. Based on your knowledge of marginal analysis, how many workers should you hire? Explain you answer.
Question 4: Answer the next question on the basis of the following cost data for a purely competitive seller:
Total Product TFC TVC
0 $150 $0
1 150 70
2 150 120
3 150 150
4 150 220
5 150 300
6 150 390
Refer to the above data. If the product price is $95, at its optimal output will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations.
Question 5: Answer the next question on the basis of the following cost data for a purely competitive seller:
Total Product TFC TVC
0 $50 $0
1 50 70
2 50 120
3 50 150
4 50 220
5 50 300
6 50 390
Refer to the above data. If the product price is $60, at its optimal output will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations
Question 6: A firm has Total Costs (TC) of $12,000 over the next three months (TOTAL for the 3 months - not per month), of which $8,000 are fixed costs (TFC) for rent on its lease that cannot be broken. If it stays in business over those months, then the firm will collect only $6,000 in revenues (TR). So, considering only this information, should they stay in business for those three months, or should they close down right now? Provide your reasoning.