Tim is a baker who produces doughnuts. He can access labour at a rate of $2 per hour, and capital at a rate of $0.25 per machine hour. He produces doughnuts according to Q = L + Kº.5. If the bakery is operating with an optimal factor allocation, and producing 40 doughnuts per day, determine the average total cost of a doughnut. The bakery employs one worker, Anil, who consumes doughnuts (d) and other goods (y) with utility U(d,y) = edy. (Assume y is the Marshallian good, with Py=$1). • • Sketch Anil's utility curve, and his budget, which is the pay he receives from his job. Do Anil's preferences satisfy the rules of preference ordering? Are there any constraints on his consumption of either good? • Derive the supply and demand curves based on Anil's individual demand, and Tim's costs of production.

Tim is a baker who produces doughnuts. He can access labour at a rate of $2 per hour, and capital at a rate of $0.25 per machine hour. He produces doughnuts according to Q = L + Kº.5. If the bakery is operating with an optimal factor allocation, and producing 40 doughnuts per day, determine the average total cost of a doughnut. The bakery employs one worker, Anil, who consumes doughnuts (d) and other goods (y) with utility U(d,y) = edy. (Assume y is the Marshallian good, with Py=$1). • • Sketch Anil's utility curve, and his budget, which is the pay he receives from his job. Do Anil's preferences satisfy the rules of preference ordering? Are there any constraints on his consumption of either good? • Derive the supply and demand curves based on Anil's individual demand, and Tim's costs of production.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Tim is a baker who produces doughnuts. He can access labour at a rate of $2 per hour, and
capital at a rate of $0.25 per machine hour. He produces doughnuts according to Q = L+ K0.5.
If the bakery is operating with an optimal factor allocation, and producing 40 doughnuts per
day, determine the average total cost of a doughnut.
The bakery employs one worker, Anil, who consumes doughnuts (d) and other goods (y) with
utility U(d,y) = edy. (Assume y is the Marshallian good, with Py=$1).
%3D
Sketch Anil's utility curve, and his budget, which is the pay he receives from his job.
Do Anil's preferences satisfy the rules of preference ordering? Are there any constraints
on his consumption of either good?
Derive the supply and demand curves based on Anil's individual demand, and Tim's
costs of production.

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