Economics 1 – A firm incurs fixed costs over the short run

Economics 1 – Fall 2016Homework 2Name: _______________________________________ID: ______________________1. A firm incurs fixed costs over the short run, even when its output is zero. Its variable costs changedepending on how much quantity it produces. You as a student also incur fixed and variable costs.a. What are your fixed costs for school, i.e. even if you chose to never attend class thissemester, what costs did you have to pay?b. What are your variable costs for every day that you attend class?2. You are a student deciding to produce ‘good grades’ in your classes.a. What are the necessary inputs you need to produce those good grades? How much of each doyou need and how do you combine those inputs?b. Do these inputs for producing good grades differ by course? Explain.3. Suppose your teacher announces that only 1 student in the class will get a good grade. How will yourefforts to produce good grades change when you are a monopoly (the only student in class) and whenyou are in a monopolistically competitive market (a class of 40 students)?4. Suppose Len pays $60 a day for equipment and $200 a day to each student he hires. Complete thefollowing table.Labor(workers)TotalProduct(boards)00120244360472580FixedCostsVariable CostsTotal CostAverage TotalCostMarginal Cost5. Article – How are existing grocery stores affected when new grocers enter the market?http://www.latimes.com/business/la-fi-grocery-wars-20150913-story.html6. The table below shows cost data for Michelle’s Organic Tomatoes, which operates in a perfectlycompetitive market. [do not mind the blank rows] [Hint: recall P=MR in perfect competition]Total Product(batches)12345678Average Fixed Cost8442282116.8141210.5AverageVariable Cost5144393635.2363944.5Average TotalCost13586675752505155Marginal Cost32283035.25070a. At a price of $35.20 per batch of tomatoes, what quantity does she produce? _____________i. What is the firm’s economic profit?ii. Do firms enter or exit the industry? _________________7. The graph below shows the market for maple syrup, a perfectly competitive industry.SMCATCDa.The quantity of maple syrup produced by each farmer is _________ and the price is _________.b. The economic profit is __________________________________________________________.c.There will be ________________ (entry / exit) in the maple syrup industry.8. The figure below shows the demand curve, marginal revenue curve, and cost curves of Balance, arepresentative producer of running shoes in monopolistic competition.a. What is the profit maximizing level of output?b. What price does Balance charge?Q* = _______________P* = ______________c. Is the running shoes market in long-run equilibrium? Explain.9. Monopoly: Big Top is the only circus in the nation. The table below illustrates the demand schedule forcircus tickets and the cost for producing the circus.ATCa.Suppose Big Top charges a single price for all tickets. Calculate Big Top’s profit maximizingprice ________ output ________.b. Compute the circus’s economic profit. _________________________________________