E-con

1. (TCO A)  Apples and oranges are substitutes in consumption. The price of oranges rises.

              What happens to the demand for apples?

           What happens to the demand for oranges?

1. The number of new cars in a market increases.

What happens to the supply of new cars?

What happens to the demand for new cars?

3.  The following table shows part of the demand for widgets.
Price(P)…Quantity(Q)
$20 ………..40
$15……….  80
$10…………120
$5  …………160
 Is demand elastic in the $20 – $15 price range?
(4 pts.) Ed = 0.8 in the $5–$10 price range. In this range of demand, by what percentage would quantity demanded change if price changes by 5 percent?
(4 pts.) Price falls from $10 to $5. Does total revenue (TR) increase, decrease, or remain the same? (SHOW WORK)

4. You have been hired to manage a small manufacturing facility which has cost and production data given in the table below.

No. of workers    Total Labor Cost        Output     Total Revenue
           1                       $100                        100             $150
           2                         200                        110               375
           3                         300                        122               650
           4                         400                        130               900
           5                         500                        136             1100
           6                         600                        140             1150
       What is the marginal product of the sixth worker?

       What is the marginal cost of the third worker?

       Based on your knowledge of marginal analysis, how many workers should you hire?    Explain you answer

5.  Answer the next question on the basis of the following cost data for a purely competitive seller:
    Total Product    TFC             TVC
              0              $100              $0
              1                100               70
              2                100             110
              3                100             185
              4                100             260
              5                100             350
              6                100             450
Refer to the above data.  If the product price is $80, at its optimal output will the firm realize an economic profit, break even, or incur an economic loss?  How much will the profit or loss be?  Show all calculations.

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6. A firm has Total Costs (TC) of $16,000 over the next three months (TOTAL for the 3 months – not per month), of which $6,000 are fixed costs (TFC) for rent on its lease that cannot be broken. If it stays in business over those months, then the firm will collect only $12,000 in revenues (TR). So, considering only this information, should they stay in business for those three months, or should they close down right now? Provide your reasoning