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##### ECON 3010 Intermediate Microeconomics Fall 2013 Problem Set #2

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Question;Problem Set #21. Draw a graph showing a set of isoquants that depict capital and labor to be perfectcomplements (not substitutable at all) in a production function that exhibits constantreturns to scale. Be sure to label the input and output levels on the isoquants.2. According to Haskel and Sadun(2009), the United Kingdom started regulating the size ofgrocery stores in the early 1990s, and today the average size of a typical U.K. grocerystore is roughly half the size of a typical U.S. store and two-thirds the size of a typicalFrench store. What implications would such a restriction on size have on a storesaverage costs? Discuss in terms of economies of scale and scope..3. A glass manufacturers production function is(based on Hsieh, 1995). Itsmarginal product functions areand. Suppose that its wage, w, is $1 per hour and the rental cost of capital, r, is $4.a. Draw an accurate figure showing how the glass firm minimizes its cost of production.b. What is the equation of the (long-run) expansion path for a glass firm? Illustrate thispath in a graph.c. Derive the long-run total cost curve equation as a function of q.4. Fierce storms in October 2004 caused TomatoFest Organic Heirlooms Farm to end itstomato harvest two weeks early. Accoridng to Gary Ibsen, a partner in this small business(Carolyn said, Tomatoes in Trouble, San Francisco Chronicle, October 29, 2004, C1,C2), TomatoFest lost about 20,000 pounds of tomatoes that would have sold for about$38,000, however, because he did not have to hire pickers and rent trucks during thesetwo weeks, his net loss was about $20,000. In calculating the revenue loss, he used thepost-storm price, which was double the pre-storm price. Did TomatoFest suffer aneconomic loss? What extra information (if any) do you need to answer this question?5. Each firm in a competitive market has a cost function of, so its marginalcost function is. The market demand function is. Determine thelong-run equilibrium price, quantity per firm, market quantity, and number of firms.

Paper#55923 | Written in 18-Jul-2015

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