9.A soot spewing blacksmith producing steel S is located near a laundry where clean clothes are hung on the line todry. Soot from the smith increases the costs of the cleaner: CL = L2 + 4S. The cleaner is a price taker who charges aprice of PL = $10 per unit of output. The blacksmith has cost function Cs = S and sells output at Ps = $40. Computethe noncooperative solution L =and S =Compute the cooperative solutions L =and S =Demonstrate that a per-unit tax of t =could induce the cooperativeoutcome.

The output of the blacksmith is given by, MCS=PS⇒2S=40⇒Snc=20 If the cleaner equates MC to price,…

9. A soot spewing blacksmith producing steel S is located near a laundry where clean clothes are hung on the line to dry. Soot from the smith increases the costs of the cleaner: CL = L² + 4S. The cleaner is a price taker who charges a price of P = $10 per unit of output. The blacksmith has cost function Cs = S2 and sells output at Ps = $40. Compute the noncooperative solution L = and S = Compute the cooperative solutions L = and S = Demonstrate that a per-unit tax of t = could induce the cooperative outcome.

9. A soot spewing blacksmith producing steel S is located near a laundry where clean clothes are hung on the line to dry. Soot from the smith increases the costs of the cleaner: CL = L² + 4S. The cleaner is a price taker who charges a price of P = $10 per unit of output. The blacksmith has cost function Cs = S2 and sells output at Ps = $40. Compute the noncooperative solution L = and S = Compute the cooperative solutions L = and S = Demonstrate that a per-unit tax of t = could induce the cooperative outcome.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 21P

See similar textbooks

Similar questions

Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?
Return to Figure 7.7. What is the marginal gain in output from increasing the number of batters from 4 to 5 and from 5 to 6? Does it continue the pattern of diminishing marginal returns? Figure 7.7 How output Affects Total costs
Compute the average total cost, average variable cost, and marginal cost of producing 50 and 72 haircuts. Draw the graph of line three curves between 60 and 72 haircuts.
What is die difference between accounting and economic profit?
How does fixed cost affect marginal cost? Why is this relationship important?
What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?
Average cost curves (except for avenge fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Why do you think that average and marginal cost curves have the same general shape?
For the firm whose cost curves are shown at right, the minimum efficient scale is OA. about 10 units of production OB. the level of fixed cost corresponding to SRATC₂ OC. about 30 units of production OD. about 50 units of production OE between 30 and 70 units of production. GI Cost per Unit SRATC, SRATC₂ 10 20 SRATC 30 40 50 60 Output per Period 70 SRATC 80 LRAC 90 100
Vinnie’s Painting Company specializes in painting houses. Their cost schedule is as follows: 1. Show to calculate for the table below Output TFC TVC TC AFC AVC ATC MC 0 1000 1 100 2 100 3 400 4 450 5 1600 6 3200 7 6400 a) Given the partial data available, finish the table and calculate all the costs. b) What is the minimum efficient scale of Vinnie’s company? c) What is the marginal cost of 6 houses? d) If Vinnie charges $825 per house, how many houses he should paint to maximize profits?
E2
A 155.
2AAWO AC I4 17.1 REVENUE, COST, AND PROFIT APPLICATIONSITSO RSYHAHD 797 20 A firm sells each unit of a product for $50. The total cost of producing x (thousand) units is described by the function C(x) = 10 – 2.5x² + x³ where C(x) is measured in thousands of dollars. (a) Use the marginal approach to determine the profit-maximizing level of output. (6) What is total revenue at this level of output? Total cost? Total profit? 1 The profit function for a firm is -000