Exam 22: Industry Supply-Part A

The market for a good is in equilibrium when the government unexpectedly imposes a quantity tax of $2 per unit.In the short run, the price will rise by $2 per unit so that firms can regain their lost revenue and continue to produce.

On a small island, papayas can only be sold in the market in the center of the island.Although papayas only cost $1 to raise, they can be sold in the market for $3.But it costs $.10 per kilometer to transport each papaya to market.If an acre of land grows 200 papayas, how much rent does an acre of land 4 kilometers from the market command?

The possibility of more firms entering an industry in the long run tends to make long-run industry supply more price elastic than short-run industry supply.

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 .50.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

The cheese business in Lake Fon-du-lac, Wisconsin, is a competitive industry.All cheese manufacturers have the cost function C = Q² + 9, while demand for cheese in the town is given by Q_d = 120 - P.The long-run equilibrium number of firms in this industry is

The price elasticity of gasoline in the United States has been estimated to be 0.15.If this is so, should profit-maximizing gasoline stations raise their prices? (Explain why or why not.)

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 a competitive market, if both demand and supply curves are linear, then a per-unit tax of $10 will generate exactly the same deadweight loss as a per-unit subsidy of $10.

On a tropical island there are 100 potential boat builders, numbered 1 through 100.Each can build up to 16 boats a year, but anyone who goes into the boatbuilding business has to pay a fixed cost of $15.Marginal costs differ from person to person.Where y denotes the number of boats built per year, boat builder 1 has a total cost function c(y)= 15 + y.Boat builder 2 has a total cost function c(y)=15 +2y, and more generally, for each i, from 1 to 100, boat builder i has a cost function c(y)= 15 + iy.If the price of boats is 40, how many boats will be built per year?

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 .30 and the fine if a shipper is caught is $35 per ounce, then the equilibrium price of marijuana per ounce is

In a certain industry, the supply curve of any firm is S_i(p)= p/2.If a firm produces 6 units of output, what are its total variable costs?

On a tropical island there are 100 potential boat builders, numbered 1 through 100.Each can build up to20 boats a year, but anyone who goes into the boatbuilding business has to pay a fixed cost of $19.Marginal costs differ from person to person.Where y denotes the number of boats built per year, boat builder 1 has a total cost function c(y)= 19 + y.Boat builder 2 has a total cost function c(y)= 19 + 2y, and more generally, for each i, from 1 to 100, boat builder i has a cost function c(y)= 19 + iy.If the price of boats is 25,how many boats will be built per year?

In East Icicle, Minnesota, on the northern edge of the corn belt, the growing season is short and the soil is poor.Corn yields are meager unless a great deal of expensive fertilizer is used.In Corncrib, Illinois, the land is fertile and flat and the growing season is 20 days longer.For any given expenditure per acre, corn yields are far greater than in East Icicle.Farmers in both places are profit maximizers who grow corn.

The bicycle industry is made up of 100 firms with the long-run cost curve c(y)= 2 + (y₂/2)and 120 firms with the long-run cost curve c(y)= y₂/4.No new firms can enter the industry.What is the long-run industry supply curve at prices greater than $2?

The cheese business in Lake Fon-du-lac, Wisconsin, is a competitive industry.All cheese manufacturers have the cost function C =Q² + 16, while demand for cheese in the town is given by Q_d = 120 - P.The long-run equilibrium number of firms in this industry is

If there are constant returns to scale in a competitive industry, then the long-run industry supply curve for that industry is horizontal.

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 $45 per ounce, then the equilibrium price of marijuana per ounce is

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 =(min{x₁, 4x₂})^1/2.The cost of factor 1 is $5 per unit and the cost of factor 2 is $5 per unit.In the short run, the industry supply curve is given by

In Baggs, Wyoming, cattle can be produced according to the following process: C = G/10 + P/40, 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?

A firm uses a single input to produce its output, which is sold in a competitive market.It gets quantity discounts on purchases of its input.If it buys x units of the input, the price it must pay per unit of input is 289/x + 3.If it buys no inputs, it doesn't have to pay anything.The firm's production function is f(x)= 45x - x².If the price of the firm's output is 1, the profit-maximizing amount of input to buy is