Question 2 a) The supply curve of a product is Q = 10P¹/³. Find the producer surplus when P=8. b) The number of kilograms Q of tomatoes harvested from a field in a day is given by the production function, Q = 150L¹/3. Find the profit maximizing number of people to employ on this farm if each kilogram of tomatoes is sold for 20 cedis, and each worker is paid an average wage of 40 cedis per day. c) A firm is breaking even in a competitive market. Is this firm making zero profits? Explain d) A car wash business washes 11,000 cars per year. The price charged per vehicle washed is 10 cedis. The total cost (total economic cost) of washing these 11000 cars each year is given as 120,000 cedis. Included in this total cost is a fixed cost of 15 percent of the 160,000 cedis capital provided by the financier of this car wash. That is, the financier could have earned 15 percent interest on this capital in the money market if he had not used it to set up this car wash. Is this car wash making profits at the end of the year? Compute the profit. If the firm is not making profits, should it shut down? i. ii. (10

Question 2 a) The supply curve of a product is Q = 10P¹/³. Find the producer surplus when P=8. b) The number of kilograms Q of tomatoes harvested from a field in a day is given by the production function, Q = 150L¹/3. Find the profit maximizing number of people to employ on this farm if each kilogram of tomatoes is sold for 20 cedis, and each worker is paid an average wage of 40 cedis per day. c) A firm is breaking even in a competitive market. Is this firm making zero profits? Explain d) A car wash business washes 11,000 cars per year. The price charged per vehicle washed is 10 cedis. The total cost (total economic cost) of washing these 11000 cars each year is given as 120,000 cedis. Included in this total cost is a fixed cost of 15 percent of the 160,000 cedis capital provided by the financier of this car wash. That is, the financier could have earned 15 percent interest on this capital in the money market if he had not used it to set up this car wash. Is this car wash making profits at the end of the year? Compute the profit. If the firm is not making profits, should it shut down? i. ii. (10

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2
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