Answers to Homework 2

 

Chapter 9

 

  1. 400 to West Philly, 100 to Center City

 

  1. All 500 police officers to West Philly    

 

  1. A to C – Constant;  C to E – Increasing; E to G – Decreasing

 

 

Chapter 10

 

           

  1. MPK / PK = MPL / PL   when cost are minimized.  Here: MPK / PK = 2, and  MPL / PL   = 4.5.  Therefore the firm should buy less capital and more labor.

 

  1. L = 30 and K = 20

 

  1. SAC > LAC

 

 

Chapter 11

 

3.         SR supply = sum of MCi

MCi = 4 + Qi

Q = 1000 MC – 4000

Q = 2000 P = 6

CS = 4000

PS = 2000

Total loss = 6000

 

6.                  LTC = Q3 – 10 Q2 + 36 Q      

LAC = LTC / Q = Q2 – 10Q + 36

DLAC / dQ = 2Q –10 = 0

Q = 5

LAC = 11

 

7.                  P = $ .20

 

Q = 80, 000

There will be 8 taxi’s

 

Chapter 12

 

 

1.                  1) increase because MR > MC and P > AVC

2) reduce because MR < MC

3) remain because MR = MC

4) figures can’t be right because P < MR

5) figures can’t be right P = TR / Q  = 3.99 which is not 35.00

 

2.                  MC = 2Q = MR = 100 – 2Q

 

100 – 2Q = 2Q, Q = 25, P =75

TR = 1875, TC = 641

Profits = 1234

 

  1. MR = P ( 1 – 1 / absolute value of elasticity )

10 ( 1 – ½) = 5

 

 

Chapter 13

 

4.Stackelberg 

 

Follower (firm 2)  MR = 36 – 3 Q1 – 6Q1 = 18

Q2 = (6-Q1) / 2

Leader (firm 1)

P1 = 36 – 3Q2-3Q1 = 36 – 3(6-Q1 / 2) – 3Q1

P1 = 27 – 3/2 Q1

MR1 = 27 – 3Q1

MR = MC

27 – 3Q1 = 18

3Q1 = 9

Q1= 3

Q2= 3/2

Q=9/2

P=22.5

Profit 1 = 13.5

Profit 2 = 6.75

 

  1. Don’t worry about this question, it is from a part of the chapter that we didn’t cover