1.The table below gives the production function for the insect spray Nobeetle at Bugout Pesticide Company. (15 marks)

#workers

Output

Avg. Product

Marginal

Product

1

1200

2

2200

3

3000

4

3600

5

4000

a.Compute the average and marginal products for each worker. Construct a table identical to the one above, and fill in the average and marginal product columns.

b.Graph the production function. On a separate graph, plot the average and marginal production functions.

2.Suppose the schedule below depicts the demand and supply for bushels of corn in Monroe County, Indiana in October, 1997. (15 Marks)

Price ($)

Quantity Demanded

Quantity Supplied

4

850

115

3.75

900

1100

3.50

950

1050

3.25

1000

1000

3.00

1050

950

2.75

1100

900

2.50

1150

850

a.What is the equilibrium price and quantity of bushels of corn for this month in Monroe County?

b.Farms are going bankrupt and leaving the business, as they cannot make a living producing at the current equilibrium price. The federal government, concerned over this face, passes legislation stating that prices for bushels of corn cannot fall below $3.75 per bushel. In this new shortage or surplus, and how large is it?

c.In (b), if there is a surplus of corn, how can this surplus be eliminated? If the government buys this surplus, how much must it spend to do so?

d.Now, instead of the above legislation in part (b), the government now decides to provide a subsidy of $0.50 per bushel to each farmer. What is the new equilibrium quantity of bushels of corn? How much do consumers pay for each bushel in this situation? How much do the farmers receive for each bushel in this situation?

e.Under the subsidy in part (d), what is the total government expenditure for this subsidy program?

3.Jennifer's Carpet Cleaners has fixed costs of $100 per month and a total cost curve as given in the table below. Output is the number of carpets cleaned. Given this data, answer the questions below.

Output

Total Cost

10

$200

20

$320

30

$460

40

$620

50

$800

60

$1000

a.The current price for cleaning a carpet is $18. How many carpets must be cleaned to maximize profits? What will the profit be?

b.Suppose the price falls to $14. Calculate the profit-maximizing output and the total profits.

c.For each of the following two situations, determine:

i)Profit-maximizing output level

ii)Total profits.

d.Fixed costs = $40,000; price = $600

Output

Total Cost

Marginal Cost

100

$80,000

200

$120,000

300

$170,000

400

$230,000

500

$300,000

600

$380,000

700

$470,000

e.Fixed Costs = $0; price = $80

Output

Total Cost ($)

Marginal Cost

1

40

2

90

3

150

4

210

5

280

6

360

7

450

8

550