Question

# 1. Use the data that is posted below to answer the following questions. If your answer...

1. Use the data that is posted below to answer the following questions. If your answer has units to it, then please state those units.

 Production Options Sugar beets (tons) Wheat  (tons) A 200 0 B 180 20 C 140 40 D 80 60 E 0 80

a) Graph Production Possibilities Frontier (Curve) for Sugar Beets and Wheat. Put sugar beets on the vertical axis and label that axis Sugar Beets and put wheat on the horizontal axis and label that axis Wheat.

b) If we are producing 140 tons of beets and 20 tons of wheat, what is the cost of producing 40 more tons of beets?

c) If we are producing 140 tons of beets and 40 tons of wheat, what is the cost of producing 40 more tons of beets?

d) Explain why your answers for (b) and (c) above are different. After all in both questions we increased the production of beets by the same 40 tons.

e) What can we say about the economy currently producing 140 tons of sugar beets and 60 tons of wheat given no change in resources and technology?

f) Which production option above (A, B, C, D or E) is the best point for this economy to be at? Explain your answer.

2.The following table represents short run cost-revenue information (in dollars) for a firm in a competitive market.

 Q P TR MR MC TC Total Profit 0 0 N/A N/A 1000 1 200 1200 2 400 1340 3 600 60 4 800 1420 5 1000 1440 6 1200 60 7 1400 80 1580 8 1600 140 9 1800 10 2000

(a) Fill in all the blanks above using the following information: The Market Price is \$200 per unit of output, the VC of producing 9 units of output is \$920, and the ATC of producing 10 units of output is \$220

(c) What is the Fixed Costs for this firm? Explain your answer.

(d) In the Short Run, if this firm would go into production, determine the profit maximizing (or loss minimizing) level of output and profit amount.

(e) In the Short Run, if this firm would instead shutdown without going into production, determine its production amount and profit amount.

(f) Please determine the best course of action for this firm in the Short Run. Please explain your reasoning.

(g) Based on the data above, in the Long Run, explain what this firm should do and why the firm should pick this course of action.

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