TOPIC C – posted Thursday
1) Assuming these production costs,
1 factory rent @ $100 per shift1 sewing machine rent @ $20 per shift1 operator – .5 hours per jean @ $10 per hour1.5 bolts of denim per jean @ $30 per bolta. What are total fixed costs?b. What are total variable costs?c. What is the cost of producing 1,000 jeans?d. If capacity is 800 jeans per shift, what would happen to the total production cost for 1,000 jeans?
2) Suppose this mythical Tight Jeans Corporation leased a second sewing machine, giving it the following production function:
Number of workers: 0 1 2 3 4 5 6 7 8
Quantity of output: 0 10 36 56 68 74 76 76 74
At what level of employment does:
a. the law of diminishing returns become apparent?
b. the marginal physical product (MPP) hit zero?
c. the MPP become negative?
3) Complete this table MarginalCost.png
a. What output has the lowest per-unit cost?
b. What is the value of fixed costs?
c. What is the significance of the marginal cost numbers?
TOPIC B - POSTED TUESDAY - Price Elasticity
The response of consumers to a change in price is measured by the price elasticity of demand, as follows: Elasticity = percent drop in quantity demanded / percent increase in price1) Suppose the following demand exists for iPhone apps: (quantity is in millions)Price$10$9$8$7$6$5$4$3Quantity demanded 2 3 4 5 6 7 8 9a. At $9, what quantity is demanded?b. If the price drops to $6, what quantity is demanded?c. Is demand elastic or inelastic in that price range?d. If advertising convinces people to demand 3 million more apps at every price, how many apps will be demanded at a price of $9?2) Using this demand schedulePrice (per pair)$120$100$80$60$40Quantity demanded (in pairs per year)6M10M15M20M 26Ma. As the price drops from $120 to $100 a pair, is demand elastic, unitary elastic, or inelastic?b. As the price drops from $80 to $60 a pair, is demand elastic, unitary elastic, or inelastic?c. As the price drops from $60 to $40 a pair, is demand elastic, unitary elastic, or inelastic?d. What is the significance of these calculations of Elasticity?
TOPIC A - posted Sunday
1) There are two approaches to measuring a country’s macroeconomic activity, which are Gross Domestic Product, and National Income. What do each of these approaches measure. List at least one advantage and disadvantage of each approach.2) Taken together, housing, transportation, food, and health expenditures account for 70 percent of the typical household budget. Most people regard these items as the “basic essentials.” What this figure depicts is how the average consumer has chosen to spend his or her income.chart.docx
- How do each of these components of demand change as prices increase?
- What is price elasticity and how might that add to your answer in #1?
- Why is the demand for San Francisco cigarettes so much more price elastic than the overall market demand for cigarettes (see in your text, the News Wire “Substitute Goods”)?
- When gasoline prices go up, how is demand for the following products affected: (a) SUVs; (b) electric cars; (c) beach hotels; (d) Netflix?
- What goods do people buy a lot more of when their incomes go up? What goods are unaffected by income changes?