Econ 102 Tutorial 6 - lecture notes PDF

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Econ 102 Tutorial Week 6 1. A price-taking firm makes air conditioners. The market price of one of their new air conditioners is €120. Its total cost information is given in the table below. Air conditioners per day Total cost (€ per day) 1 2 3 4 5 6 7 8

100 160 220 310 405 510 650 800

How many air conditioners should the firm produce per day if its goal is to maximise its profit?

2. The Paducah Slugger Company makes baseball bats out of lumber supplied to it by Acme Sporting Goods, which pays Paducah €10 for each finished bat. Paducah’s only factors of production are lathe operators and a small building with a lathe. The number of bats per day it produces depends on the number of employee-hours per day, as shown in the table below. Number of bats per day

Number of employeehours per day  0  5

10 15 20 25 30 35

 0  1  2  4  7 12 18 25

a. If the wage is €15 per hour and Paducah’s daily fixed cost for the lathe and building is €60, what is the profit-maximising quantity of bats? b. What would be the profit-maximising number of bats if the firm’s fixed cost were not €60 per day but only €30?

3. For the pizza seller whose marginal, average variable and average total cost curves are shown in the diagram below, what is the profitmaximising level of output and how much profit will this producer earn if the price of pizza is €2.50 per slice?

4. For the pizza seller whose marginal, average variable and average total cost curves are shown in the diagram below, what is the profitmaximising level of output and how much profit will this producer earn if the price of pizza is €0.80 per slice?

5. For the pizza seller whose marginal, average variable and average total cost curves are shown in the diagram below, what is the profitmaximising level of output and how much profit will this producer earn if the price of pizza is €0.50 per slice?

6.

The table below gives the relationship between the number of workers in a firm, and the total output that can be produced per day. Workers are paid $20 per day. a. Fill in the rest of the table, expressing each of the costs in the cost per day for the firm. (Note: AFC is average fixed cost, AVC is average variable cost, ATC is average total cost, and MC is marginal cost) b. Does this production technology exhibit diminishing marginal products? Explain.

Workers

Q

0

0

1

25

2

64

3

94

4

119

5

140

6

158

Fixed Variable Total Cost Costs Costs 10

AFC

AVC

ATC

MC

-

-

-

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