Exam 22: Industry Supply

If some firm in an industry has the production function F(x, y) = , where x and y are the only two inputs in producing the good, then that industry cannot be competitive in the long run.

Brand X is one of many firms in a competitive industry where each firm has a constant marginal cost of 2 dollars per unit of output. If marginal cost for Brand X rises to 4 dollars per unit and marginal costs of all other firms in the industry stay constant, by how much does the price in the industry increase?

In the problem discussed in your workbook, the cost of capturing a cockatoo and transporting him to the United States is about $40 per bird. Cockatoos are drugged and smuggled in suitcases to the United States. Half of the smuggled cockatoos die in transit. Each smuggled cockatoo has a 10% probability of being discovered, in which case the smuggler is fined. If the fine imposed for each smuggled cockatoo is increased to $700, then the equilibrium price of cockatoos in the United States will be

In Baggs, Wyoming, cattle can be produced according to the following process: C = = + , where C is the number of cattle, G are bushels of grain, and P are acres of pasture. If grain costs $4 per bushel and pasture costs $3 per acre, how many cattle can Rancher Roy produce with a budget of $6,000?

In the absence of government interference, there is a constant marginal cost of $5 per ounce for growing marijuana and delivering it to buyers. If the probability that any shipment of marijuana is seized is .10 and the fine if a shipper is caught is $25 per ounce, then the equilibrium price of marijuana per ounce is

The price elasticity of demand for gasoline in the United States is equal to 0.15. How should the price elasticity of demand for the individual firm compare to 0.15 (higher, lower, same, can't tell)? Explain why.

In the absence of government interference, there is a constant marginal cost of $6 per ounce for growing marijuana and delivering it to buyers. Suppose that government authorities seize shipments whenever they find them and resell the marijuana that they seize on the open market. The probability that any shipment of marijuana is seized is .10. If a shipment is seized, there is no other punishment besides loss of the marijuana that is seized. The effect of the government action is to

In Baggs, Wyoming, cattle can be produced according to the following process: C = = + , where C is the number of cattle, G are bushels of grain, and P are acres of pasture. If grain costs $4 per bushel and pasture costs $4 per acre, how many cattle can Rancher Roy produce with a budget of $4,000?

An industry has 100 firms. These firms have identical production functions. In the short run, each firm has fixed costs of $200. There are two variable factors in the short run and output is given by y = . The cost of factor 1 is $2 per unit and the cost of factor 2 is $4 per unit. In the short run, the industry supply curve is given by