Week 2 Questions - Firms and Markets

Hi all,

Here are some tutorial questions taken from your textbook. Will be useful if you attended all of them.

1. A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

Hours             Qty of fish 

0                            0

1                           10

2                           18

3                           24

4                           28

5                           30

a. What is the marginal product of each hour spent fishing?

b. Use these data to graph the fisherman's production function. Explain its shape.

c. The fisherman has a fixed cost of $10 (his pole). The opportunity cost of his time is $5 per hour. Graph the fisherman's total cost curve. Explain its shape. 

2. You are thinking of setting up a lemonade stand. The stand itself costs $200. The ingredients for each cup of lemonade cost $0.50

a. What is your fixed cost of doing business?

b. What is your variable cost?

c. Construct a table showing your total cost, average cost, and marginal cost for output levels varying from 0 to 10 gallons. (Hint: There are 16 cups in a gallon.   

3.  A firm has a fixed cost of $100 and average variable cost of $5 x Q, where Q is the number of units produced.
a. Construct a table showing total cost for Q from 0 to 10.
b. Graph the firm's curves for marginal cost and average cost.