appropriate position on the diagram that answers the question. The correct position for each marker is worth 4 points. 1) Show with marker 1 on the horizontal axis the equilibrium level of output in period 1 that would occur if marginal costs equal zero and if there was no allocation for period 2. 2) Show with marker 2 on the horizontal axis the equilibrium level of output in period 2 that would occur if marginal costs equal zero and if there was no allocation in period 1. 3) Show with marker 3 on the horizontal axis the equilibrium level of output in each period if the marginal cost is zero output is allocated optimally between the two periods. 4) Show with marker 4 on the vertical axis the marginal user cost. 5) Show with marker 5 on the vertical axis the maximum (choke) price in period one. Marginal Net Benefits in Period 1 (dollars per unit) 6 5 3 Quantity in Period 1 Present Value of Marginal Net Benefits in Period 1 Present Value of Marginal Net Benefits in Period 2 Marginal Net Benefits in Period 2 (dollars 0123456 8 9 10 11 12 13 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 per unit) 6 5.45 16 17 18 19 20 Quantity in

appropriate position on the diagram that answers the question. The correct position for each marker is worth 4 points. 1) Show with marker 1 on the horizontal axis the equilibrium level of output in period 1 that would occur if marginal costs equal zero and if there was no allocation for period 2. 2) Show with marker 2 on the horizontal axis the equilibrium level of output in period 2 that would occur if marginal costs equal zero and if there was no allocation in period 1. 3) Show with marker 3 on the horizontal axis the equilibrium level of output in each period if the marginal cost is zero output is allocated optimally between the two periods. 4) Show with marker 4 on the vertical axis the marginal user cost. 5) Show with marker 5 on the vertical axis the maximum (choke) price in period one. Marginal Net Benefits in Period 1 (dollars per unit) 6 5 3 Quantity in Period 1 Present Value of Marginal Net Benefits in Period 1 Present Value of Marginal Net Benefits in Period 2 Marginal Net Benefits in Period 2 (dollars 0123456 8 9 10 11 12 13 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 per unit) 6 5.45 16 17 18 19 20 Quantity in

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.

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