Microeconomics 9th Edition David Colander - Solutions

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9.32. The long-run average cost for production of hard-disk drives is given by where Q is the annual output of a firm, w is the wage rate for skilled assembly labor, and r is the price of capital services. The corresponding long-run marginal cost curve is The demand for labor for an individual firm
9.31. In a constant-cost industry in which firms have U-shaped average cost curves, the long-run market supply curve is a horizontal line. This market supply curve is not the horizontal sum of individual firms’ long-run supply curves. In this respect, the long-run market supply curve differs from
9.30. Each firm in the perfectly competitive widget industry produces with the levels of marginal cost (MC)and total variable cost (TVC) at various levels of output Q shown in the following table. Each firm has a total fixed cost of 64 and a sunk fixed cost of 48.
9.29. Support or refute the following: “In the long run the firm’s producer surplus and profits will be equal.”
9.28. The long-run total cost function for producers of mineral water is TC(Q) ! cQ, where Q is the output of an individual firm expressed as thousands of liters per year.The market demand curve is D(P) ! a " bP. Find the long-run equilibrium price and quantity in terms ofa, b, andc. Can you
9.27. It is 2017, and you work for a prestigious management consultant firm whose client is a large agribusiness company that is considering acquiring an ownership stake in several U.S. yellow perch farming operations.(The yellow perch is a fresh fish found in the United States and raised
9.26. Suppose that the world market for calcium is perfectly competitive and that, as a first approximation, all existing producers and potential entrants are identical.Consider the following information about the price of calcium:; Between 1990 and 1995, the market price was stable at about $2 per
9.25. The raspberry growing industry in the United States is perfectly competitive, and each producer has a long-run marginal cost curve given by MC(Q) ! 20 $2Q. The corresponding long-run average cost function is given by . The market demand curve is D(P) ! 2,488 " 2P. What is the long-run
9.24. The global propylene industry is perfectly competitive, and each producer has the long-run marginal cost function MC(Q) ! 40 " 12Q $ Q2. The corresponding long-run average cost function is AC(Q) ! 40 " 6Q $Q2/3. The market demand curve for propylene is D(P) !2200 " 100P. What is the long-run
9.23. The global cobalt mining industry is perfectly competitive. Each existing firm and every potential entrant faces an identical U-shaped average cost curve. The minimum level of average cost is $5 per ton and occurs when a firm produces 2 million tons of cobalt per year.The market demand curve
9.22. During the week of February 9–15, 2001, the U.S.rose market cleared at a price of $1.00 per stem, and 4 million stems were sold that week. During the week of June 5–11, 2001, the U.S. rose market cleared at a price of$0.20 per stem, and 3.8 million stems were sold that week.From this
9.21. Consider a point on a supply curve where price and quantity are positive. Determine the numerical value of the price elasticity of supply at that point when the supply curve isa) vertical at a positive quantityb) horizontal at a positive pricec) a straight line through the origin, with a
9.20. A firm’s short-run supply curve is given by What is the equation of the firm’s marginal cost curve SMC(Q)?
9.19. A competitive industry consists of six type A firms and four type B firms.Each firm of type A operates with the supply curve:Each firm of type B operates with the supply curve:fora) Suppose the market demand is At the market equilibrium, which firms are producing, and what is the equilibrium
9.18. A firm in a competitive industry produces its output in two plants. Its total cost of producing Q1 units from the first plant is TC1 ! (Q1)2, and the marginal cost at this plant is MC1 ! 2Q1. The firm’s total cost of producing Q2 units from the second plant is TC2 ! 2(Q2)2;
9.17. Suppose a competitive, profit-maximizing firm operates at a point where its short-run average cost curve is upward sloping. What does this imply about the firm’s economic profits? If the profit-maximizing firm operates at a point where its short-run average cost curve is downward sloping,
9.16. The wood-pallet market contains many identical firms, each with the short-run total cost function STC(Q) ! 400 " 5Q " Q2, where Q is the firm’s annual output (and all of the firm’s $400 fixed cost is sunk). The corresponding marginal cost function is SMC(Q) ! 5 "2Q. The market demand
9.15. A market contains a group of identical price-taking firms. Each firm has a marginal cost curve SMC(Q) !2Q, where Q is the annual output of each firm. A study reveals that each firm will produce if the price exceeds$20 per unit and will shut down if the price is less than$20 per unit. The
9.14. A perfectly competitive industry consists of two types of firms: 100 firms of type A and 30 firms of type B.Each type A firm has a short-run supply curve sA(P) ! 2P.Each type B firm has a short-run supply curve sB(P) !10P. The market demand curve is D(P) ! 5000 # 500P.What is the short-run
9.13. There are currently 10 identical firms in the perfectly competitive gadget manufacturing industry. Each firm operates in the short run with a total fixed cost of F and total variable cost of 2Q2, where Q is the number of gadgets produced by each firm. The marginal cost for each firm is MC !
9.12. The oil drilling industry consists of 60 producers, all of whom have an identical short-run total cost curve, STC(Q) ! 64 " 2Q2, where Q is the monthly output of a firm and $64 is the monthly fixed cost. The corresponding short-run marginal cost curve is SMC(Q) ! 4Q.Assume that $32 of the
9.11. Newsprint (the paper used for newspapers) is produced in a perfectly competitive market. Each identical firm has a total variable cost TVC(Q) ! 40Q " 0.5Q2, with an associated marginal cost curve SMC(Q) ! 40 "Q. A firm’s fixed cost is entirely nonsunk and equal to 50.a) Calculate the price
9.10. The bolt-making industry currently consists of 20 producers, all of whom operate with the identical short-run total cost curve STC(Q) ! 16 " Q2, where Q is the annual output of a firm. The corresponding short-run marginal cost curve is SMC(Q) ! 2Q. The market demand curve for bolts is D(P) !
9.9. Ron’s Window Washing Service is a small business that operates in the perfectly competitive residential window washing industry in Evanston, Illinois. The short-run total cost of production is STC(Q) ! 40 " 10Q " 0.1Q2, where Q is the number of windows washed per day. The corresponding
9.8. Dave’s Fresh Catfish is a northern Mississippi farm that operates in the perfectly competitive catfish farming industry. Dave’s short-run total cost curve is STC(Q) !400 " 2Q " 0.5Q2, where Q is the number of catfish harvested per month. The corresponding short-run marginal cost curve is
9.7. A producer operating in a perfectly competitive market has chosen his output level to maximize profit. At that output, his revenue and costs are as follows:Revenue $200 Variable costs $120 Sunk fixed costs $60 Nonsunk fixed costs $40 Calculate his producer surplus and his profits. Which (if
9.6. A bicycle-repair shop charges the competitive market price of $10 per bike repaired. The firm’s shortrun total cost is given by STC(Q) ! Q2/2, and the associated marginal cost curve is SMC(Q) ! Q.a) What quantity should the firm produce if it wants to maximize its profit?b) Draw the shop’s
9.5. A competitive, profit-maximizing firm operates at a point where its short-run average cost curve is upward sloping. What does this imply about the firm’s economic profits? Briefly explain.
9.4. A firm can sell its product at a price of $150 in a perfectly competitive market. Below is an incomplete table of a firm’s various costs of producing up to 6 units of output. Fill in the remaining cells of the table, and then calculate the profit the firm earns when it maximizes profit.
9.3. A firm sells a product in a perfectly competitive market, at a price of $50. The firm has a fixed cost of $30.Fill in the following table and indicate the level of output that maximizes profit. How would the profit-maximizing choice of output change if the fixed cost increased from$40 to $60?
9.2. Last year, the accounting ledger for an owner of a small drug store showed the following information about her annual receipts and expenditures (she lives in a taxfree country, so don’t worry about taxes):Revenues $1,000,000 Wages paid to hired labor $ 300,000(other than herself )Utilities
9.1. The annual accounting statement of revenues and costs for a local flower shop shows the following:Revenues $250,000 Supplies $ 25,000 Employee salaries $170,000 If the owners of the firm closed its operations, they could rent out the land for $100,000. They would then avoid incurring any of
10. Explain the difference between the following concepts: producer surplus, economic profit, and economic rent.
9. In the long-run equilibrium in an increasing-cost industry, each firm earns zero economic profits. Yet there is a positive area between the long-run industry supply curve and the long-run equilibrium price. What does this area represent?
8. What is the producer surplus for an individual firm?What is the producer surplus for a market when the number of firms in the industry is fixed and input prices do not vary as industry output changes? When is producer surplus equal to economic profit (for either a firm or an industry)? When
7. What is economic rent? How does it differ from economic profit?
6. Consider two perfectly competitive industries—Industry 1 and Industry 2. Each faces identical demand and cost conditions except that the minimum efficient scale output in Industry 1 is twice that of Industry 2. In a long-run perfectly competitive equilibrium, which industry will have more
5. How does the price elasticity of supply affect changes in the short-run equilibrium price that results from an exogenous shift in the market demand curve?
4. What is the shutdown price when all fixed costs are sunk? What is the shutdown price when all fixed costs are nonsunk?
3. Would a perfectly competitive firm produce if price were less than the minimum level of average variable cost? Would it produce if price were less than the minimum level of short-run average cost?
2. Why is the marginal revenue of a perfectly competitive firm equal to the market price?
1. What is the difference between accounting profit and economic profit? How could a firm earn positive accounting profit but negative economic profit?
Explain the difference between economic profit, producer surplus, and economic rent.
Calculate producer surplus for the entire market in a short-run equilibrium and a long-run equilibrium.
Define and compute producer surplus for a price-taking firm.
Explain what economic rent is and show graphically how it could arise in a perfectly competitive equilibrium.
Show, using graphs, how the long-run market supply curve is determined in a constant-cost industry, an increasing cost industry, and a decreasing cost industry.
Solve for the long-run equilibrium price, the equilibrium quantity demanded and supplied at the market level, the quantity supplied by an individual firm in equilibrium, and the equilibrium number of firms, given the market demand curve and the marginal and average cost curve for a typical firm.
State the conditions for the long-run perfectly competitive equilibrium.
Indicate the difference between the short run and the long run.
Perform comparative statics analysis of the short-run equilibrium in a perfectly competitive market.
Build up the short-run market supply curve from the short-run supply curves of individual firms.
Illustrate graphically an average nonsunk curve and explain how the presence of nonsunk fixed costs affects a perfectly competitive firm’s short-run supply curve.
Derive a perfectly competitive firm’s short-run supply curve from the firm’s profit-maximization problem.
Illustrate graphically the profit-maximization condition for a perfectly competitive firm.
Explain the difference between economic profit and accounting profit.
Describe the conditions that characterize a perfectly competitive market.
11. Michael Tanner and Stephen Moore of the Cato Institute recently calculated the hourly wage equivalent of welfare for a single mother with two children for each of the 50 United States. Their estimates ranged from $17.50 an hour for Hawaii to $5.33 in Mississippi. What do you suppose were their
10. According to economists Henry Saffer of Kean University, Frank J. Chaloupka of the University of Illinois at Chicago, and Dhaval Dave of CUNY Graduate Center, using the criminal justice system to deter one person from using drugs costs $1,733, and using treatment centers costs$1,206.a. Which of
9. The number of auto accidents per year is the equivalent of a 737-plane crash every day. In the book Why Not?Yale professors Barry Nabalof and Ian Ayres suggest that computers that record driver behavior (similar to the black boxes in planes that record crashes) be installed in cars. In trials
8. Why might an economist propose a policy that has little chance of adoption?
7. In a study of hospital births, the single most important prediction factor of the percentage of vaginal births as opposed to Caesarean (C-section) births was ownership status of hospitals—whether they were for-profit or nonprofit.a. Which had more C-sections, and why?b. What implications about
6. Technology will soon exist such that individuals can choose the sex of their offspring. Assume that technology has now arrived and that 70 percent of the individuals choose male offspring.a. What effect will that have on social institutions such as families?b. What effect will it have on
5. According to U.S. government statistics, the cost of averting a premature death differs among various regulations.Car seat belt standards cost $100,000 per premature death avoided, while hazardous waste landfill disposal bans cost$4.2 trillion per premature death avoided. If these figures are
4. The technology is now developing so that road use can be priced by computer. A computer in the surface of the road picks up a signal from your car and automatically charges you for the use of the road.a. How could this technological change contribute to ending bottlenecks and rush-hour
3. If someone offered you $1 million for one of your kidneys, would you sell it? Why or why not?
2. How much do you value your life in dollar terms? Are your decisions consistent with that valuation?
1. In cost/benefit terms, explain your decision to take an economics course.
5. In his paper “Why Did the Economist Cross the Road? The Hierarchical Logic of Ethical and Economic Reasoning,”economist Andrew Yuengert of Pepperdine University argues that “economists often give truncated justifications for their activities as economists out of fear that
4. Critics have pointed out a number of flaws in cost/benefit analysis: It assigns a dollar value to things that are not commodities such as human life; it places a price on public goods that we consume collectively (such as air quality); it downgrades the importance of the future through its
3. The text deemphasizes the fact that people are social creatures who feel a need to conform to norms; Post-Keynesians emphasize norms.a. Who shapes these social norms?b. Does society as a whole benefit from these norms?c. How does the existence of these norms affect the analysis presented in the
2. In standard textbook economic analysis, institutions are often portrayed as creating market failures.a. Give an example of market failure caused by an institution not discussed in the text.b. What would a free market advocate likely say should be done about the failure?c. How would an
1. Even though a policy’s stated goals may be laudable, its actual outcome can often cause serious problems.a. How much does it matter to an economist how closely a policy’s goals match its outcome?b. How much does it matter to a politician? (Austrian)
15. What is the basis for the opinions of public choice economists about government’s ability to correct market failures?
14. Anthony Zielinski, a member of the Milwaukee Board of Supervisors, proposed that the county government sell the organs of dead welfare recipients to help pay off the welfare recipients’ welfare costs and burial expenses. What was the likely effect of that proposal? Why? ( LO23-4 )
13. Why are economists’ views of politicians cynical?
12. As organ transplants become more successful, scientists are working on ways to transplant animal organs to humans. Pigs are the odds-on favorites as “donors”since their organs are about the same size as human organs. ( LO23-3 )a. What would the development of such organ farms likely do to
11. Until recently, China had a strict one-child-per-family policy. For cultural reasons, families favor boys and there are now many more male than female children born in China. How is this likely to affect who pays the cost of dates in China in 15 to 20 years? Explain.( LO23-3 )
10. What are three ways in which a well-functioning market might result in undesirable results? ( LO23-3 )
9. In “Valuing Reduced Risks to Children: The Case of Bicycle Safety Helmets,” economists Robin R. Jenkins, Nicole Owens, and Lanelle Bembenek Wiggins estimate the value of the lives of children by using parents’willingness to purchase bicycle helmets. Wearing a helmet reduces the probability
8. If one uses a willingness-to-pay measure in which life is valued at what people are willing to pay to avoid risks that might lead to death, the value of a U.S. citizen’s life is $2.6 million, a Swede’s life is worth $1.2 million, and a Portuguese’s life is worth $20,000 (according to an
7. Economist Steven D. Levitt estimated that, on average, for each additional criminal locked up in the United States, 15 crimes are eliminated. In addition, although it costs about $30,000 a year to keep a prisoner incarcerated, the average prisoner would have caused $53,900 worth of damage to
6. In the 1970s legislators had difficulty getting laws passed requiring people to wear seat belts. Now not only do most people wear seat belts, many cars have air bags too. Do people value their lives more today? ( LO23-2 )
5. Should the buying and selling of body organs be allowed Why or why not? ( LO23-2 )
4. In the early 1990s, the 14- to 17-year-old population fell because of low birth rates in the mid-1970s.Simultaneously the combined decisions of aging baby boomers to have kids resulted in an increase in the number of babies and hence in an increase in the number of parents needing baby-sitters.
3. Would all economists oppose price controls? Why or why not? ( LO23-1 )
2. Would it be wrong for economists to propose only Pareto optimal policies? ( LO23-1 )
1. Could anyone object to a Pareto optimal policy?Why? ( LO23-1 )
Q-10 In what way does government positively contribute to economic policy? In what way does it negatively contribute to economic policy?
Q-9 True or false? If someone chooses to sell himself into slavery, the individual, and thus society, is better off.
Q-8 A cocaine addict purchases an ounce of cocaine from a drug dealer. Since this was a trade both individuals freely entered, is society better off?
Q-7 True or false? The goal of society is efficiency.
Q-6 When using marginal cost/marginal benefit analysis, do “other things remain constant”?Explain.
Q-5 Why should you be very careful about any cost/benefit analysis?
Q-4 If the table in the text correctly describes the valuation individuals place on life with regard to smoke detector purchases and premium tire usage, how would you advise them to alter their behavior in order to maximize utility?
Q-3 When can “being mean”actually be “being nice”?
Q-2 How does a radical analysis of labor markets differ from a mainstream analysis?
Q-1 If someone suggests that economists should focus only on Pareto optimal policies, how would you respond?
LO23-4 Explain why most economists are doubtful government can correct failure of market outcomes.
LO23-3 Describe three types of failure of market outcomes.

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Microeconomics 9th Edition David Colander - Solutions

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