1)
The figure to the right illustrates the average total cost (ATC) and marginal cost (MC) curves for
an orange farmer in California. Assume the market for oranges is perfectly competitive.
Suppose the market price of oranges is $20.00 per crate. Characterize the farmer's profit.
At a $20.00 price, the farmer will Break even.
The orange farmer will make a profit if the price of oranges is above
$
per crate. (Enter your response as an integer.) 2)
Refer to the following table:
Quantity
Total
Total
Profit
Marginal Marginal
(Bushels) Revenue
Cost
(TRminus−TC) Revenue
Cost
(Q)
(TR)
(TC)
(MR)
(MC)
0
$0.00
$1.001.00
-$1.001.00
--1
4.004.00 4.004.00
0.000.00
$4.004.00 $3.003.00
2
8.008.00 6.006.00
2.002.00
4.004.00 2.002.00
3
12.0012.00 7.507.50
4.504.50
4.004.00 1.501.50
4
16.0016.00 9.509.50
6.506.50
4.004.00 2.002.00
5
20.0020.00 12.0012.00
8.008.00
4.004.00 2.502.50
6
24.0024.00 15.0015.00
9.009.00
4.004.00 3.003.00
7
28.0028.00 19.5019.50
8.508.50
4.004.00 4.504.50
8
32.0032.00 25.5025.50
6.506.50
4.004.00 6.006.00
9
36.0036.00 32.5032.50
3.503.50
4.004.00 7.007.00
10
40.0040.00 40.5040.50 negative 0.50−0.50 4.004.00 8.008.00
Suppose the price of wheat rises to $5.00 per bushel. Farmer Parker will maximize
Profits by producing
bushels of wheat (enter a whole number).
He will make a profit of $ (round your answer to the nearest penny). 3)
The table below shows the quantity of workers and total output for a local pizza parlor. Answer the
following questions based on this table:
Quantity of Workers Total Output
0
0
1
44
2
—
3
4
5
6 1818
2323
2727
2525
      
  
a. When the owner hires 4 workers, the average product of labor is pizzas. (Enter your response rounded to two decimal places.)
b. The marginal product of the fifth worker is
pizzas. (Enter your response as a whole number.)  
c.
If the marginal product of the second worker is 6, then the total number of pizzas produced when 2
workers are hired is
pizzas. (Enter your response as a whole number.) 
 
d.  Assuming the marginal product of the second worker is 6, the law of diminishing marginal returns
set in with the
A. fourth worker hired.
This is the correct answer.
B. third worker hired.
C. sixth worker hired.
D. fifth worker hired. 4) Lauren grows grapes. Her average variable cost (AVC), average total cost (ATC), and marginal cost
(MC) of production are illustrated in the figure to the right.
Assume the market for grapes is perfectly competitive and that the market price is
$4.00 per crate.
Characterize Lauren's economic profits. Assume she produces such that she maximizes profits in the
short run.
Using the rectangle drawing tool, shade in Lauren's economic profits. Attach the correct label to indicate
whether she is earning a profit (Profit) or incurring a loss (Loss).
Carefully follow the instructions above, and only draw the required
object. I believe this graph is correct, but I am confused why it’s correct.
6)
If a 18 percent increase in the price of Cheerios causes a 17 percent reduction in the number of boxes of
cereal demanded, the price elasticity of demand for Cheerios is minus− response rounded to two decimal places.)
The demand for Cheerios is inelastic or elastic? 7) (Enter your Farmer Brown grows Peaches The average total cost and marginal cost of growing
Peaches for an individual farmer are illustrated in the graph to the right.  Assume the market for peaches
is perfectly competitive and that the market price is
$38 per Box. Also assume that farmer Brown is producing the amount of
Peaches that maximizes profits.
Use the rectangle drawing tool to shade in farmer Brown's profit. Properly label this shaded area.
Carefully follow the instructions above, and only draw the required objects.   Graph shown below: Why is this graph correct?
8)
Consider the graph below showing the market demand and supply for corn. Use the line drawing tool to
graph the demand for the corn produced by one corn farmer.
Properly label this line.
Carefully follow the instructions above, and only draw the required objects.  
They system told me this was the correct answer in the chart on the right, but I don’t understand why.
Can you explain? 9)
Consider the market for gasoline, illustrated in the figure to the right.
The equilibrium quantity of gasoline is
million gallons (enter a numeric response using a
real number rounded to two decimal places) and the equilibrium price is $
If instead the market price were $1.75 then there would be a shortage of Graph shown below: per gallon.
million gallons. 10)
Suppose the price elasticity of demand for cereal is −0.85.
If so, then the demand for cereal is inelastic.
In another example, assume the price elasticity of demand for a particular magazine is
−1.26.
The demand for the magazine is elastic.
Why is the magazine elastic?
11)
Sophia grows Christmas trees. Her cost of production is shown in the table below.
Christmas Trees Total Cost
1
$7070
2
$105105
3
$189189
4
$287287
5
$399399
6
$525525
7
$665665
Suppose the market for Christmas trees is perfectly competitive and that the market price for Christmas
trees is $119 per tree.
How many Christmas trees should Sophia grow?
Sophia should grow
trees. (Enter your response as an integer value.) What is Sophia's profit?
Sophia's profit is
$
(Enter your response to the nearest dollar.) 12)
Consider the two demand curves illustrated in the figure to the right.
Which of the two is relatively more elastic?
Which is more elastic? (D1 or D2)
Graph shown below: 13)
[Related to Solved Problem
#3]
Frances sells earrings in the perfectly competitive earring market. Her output per day and costs are seen
in the table to the right.  
a. If the current equilibrium price in the earring market is
$1.701.70,
what price will Frances charge?
A.$2.00
B. $1.25
C. $1.70
D. $5.00
b. Find the correct quantities for the missing values in the table, as represented by
(i, ii, iii, and iv; enter all values as dollars and cents).
(i) Marginal revenue is $
(ii) Total revenue is $
(iii) Marginal revenue is $
(iv) Total revenue is $ c. What quantity of earrings will maximize Frances' profit?
earnings. 14)
If the market price 'Pmkt' is above the price 'P0', then quantity supplied is
greater than quantity demanded and the market is in surplus
. The answers are in red, but I am still unclear on the why its greater and the market has a surplus.?

 

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