3. What out the supply curve of a monopoly?
A. There is not a supply curve for monopolists.
B. It is given by P = MC when the firm operates.
C. It is a horizontal line at P=MC.
D. It is downward sloping.
4. A firm produces cuddly teddy bears with the production function Q = K0.25 L0.5. What are the returns to scale of this production function?
A. Increasing Returns to Scale
B. Constant Returns to Scale
C. Decreasing Returns to Scale
D. Not enough information.
5. A coffee roaster produces coffee beans with the following technology Q = K0.5 L0.5. In the short-terns, the coffee roaster's capital is fixed at K¯ = 100. If the rental rate of capital is $10 per unit and wages are $10 per hour, what are the roaster's short-run costs as a function of the quantity it produces?
A. C(Q) = 1000 + Q2/10
B. C(Q) = 20Q
C. C(Q) = 1000 + 10Q
D. C(Q) = 1000 + Q/10
6. Suppose all firms in a perfectly competitive market produce with a cost function given by C(Q) = 100 + Q2. Market demand is given by QD= 2,004,000 - 200P. How many films are in the market in the long-run equilibrium?
7. For the production fuction F(L, K) = L0.25K0.25 what are the cost minimizing L and of Q = 100 when w = 10 and r = 10?
8. Stamptown Coffee produces coffee beans with the production function Q = KL. In the short-term Stamptown's capital is fixed at k = 100. If the rental rate of capital is $10 per unit and wages are $10 per hour, what are the roaster's short-run costs as a function of the quantity it produces?
9. For a firm with the cost function C(Q) = 2Q3 - 8Q2 + 10Q + 28 below what price will they shut down in the short run?
10. A firm has the cost function C(Q) = 4Q2 + 12Q +36. It operates in perfectly competitive market.
a) At what price will this firm make exactly zero profit.
b) What is the firm's short run supply curve?
c) There are 16 identical firms in the market. Market demand is given by QD = 76 - 2p. Find short run market equilibrium price and quantity. Are profits positive or negative?
d) Will firms enter or exit the industry in the long run? What is the long run equilibrium market quantity and how many firms are there in the long run?
11. Suppose Apple announces a new product this year: the iEconomist! Apple produces iEconomists with the following total cost function C(Q) = Q2. This will be Apple's cost function for the rest of this problem. Demand for iEconomists is given by 4Q = 4,800 2P.
A. How many iEconomists should Apple produce while it is the only producer of this product? At what price should they sell them? What are Apple's profits?
B. Graph the demand curve (D), the marginal revenue curve (MR), the marginal cost curve (MC), and the average cost curve (AC) for Apple (this includes the y and x intercepts where applicable). Label the monopoly price (P*M) and quantity (Q*M). Shade the area Remember that price is on the y-axis while quantity is on the x-axis.
C. In the year after Apple debuts the iEconomist, Samsung introduces its own version of the iEconomist called the Galactic Economist which is produced with the same cost function (that stays the same throughout this problem). A clever and soon to be indicted executive proposes a secret agreement between Apple and Samsung where they both act like monopolists of a single product and split the profit 50/50. Under this arrangement, what quantity is produced? At what price does it sell? What are Apple's profits? What are Samsung's profits?
D. In the long-run, many other firms figure out how to produce (Economists, but they are less efficient than Apple and Samsung. In particular, the cost function for all new entrants is given by C(Q) = Q2 + 4Q + 64. What will happen to prices in the long-run? What will happen to Apple's profits on the iEconomist in the long-run?