Average Average Variable Total Marginal Quantity Cost Cost Cost 1 $ 50 $ 90 $ 50 2 45 65 40 3 40 53 30 4 35 45 20 5 34 42 30 6 35 41 40 7 37 43 50 8 40 45 60 a) At a product price of $ 40, how many units will this firm produce in the short-run? EXPLAIN.

What will be its profits or losses? b) At a product price of $ 50, how many units will this firm produce in the short-run? c) At a product price of $ 60, how many units will this firm produce in the short-run? Table 1 Number of Workers Units of Output 2 100 3 160 4 210 5 250 6 280 7 300 8 310 Refer to Table 1 above. The marginal product of the 3rd unit of labor is: a) 30 b) 53.33 c) 60 d) 160 5. Refer to Table 1 above. If the price of output is $2 per unit, the marginal revenue product of the 4th unit of labor is: a) $50 b) $52.5 c) $100 6. A firm’s demand function is defined as Q = 30 – 2P. a) Use this demand function to calculate total revenue when price is equal to 10 and when price is equal to 11. b) What is marginal revenue equal to between P=10 and P=11? A grocery store notices that the cross-price elasticity between ice cream and chocolate syrup is -.3. The store is advertising a sale with ice cream prices reduced by 20%. By how much should they expect chocolate syrup sales to increase? A firm’s demand function is defined as Q = 14 – 2P. a) Use this function to calculate total revenue when price is equal to 3 and when price is equal to 4. b) What is marginal revenue equal to between P=$3 and P=$4? If the income elasticity of cigarettes sold in China is 1.5: a) What would happen to the quantity demanded of cigarettes if income increases? b) Are cigarettes a “normal” or “inferior” good? c) What would happen to the quantity demanded if household income were to rise by 1% next year? Brian and Kim own a business employing 8 workers to produce commemorative t-shirts for campus organizations and events. They are currently producing 2000 shirts per month with average total cost of $8.00, average fixed cost of $2.00, and marginal cost of $10.00. Calculate the following for Brian and Kim’s firm: a) average variable cost b) total fixed cost c) total cost If the cross-price elasticity of aluminum with respect to steel is 2.0: a) What would happen to the quantity demanded of aluminum if the price of steel increases? b) Are aluminum and steel substitutes or complements? c) What would happen to the quantity demanded of aluminum if the price of steel were to rise by 1% next year? Why is the equality of marginal revenue (MR) and marginal cost (MC) essential for profit maximization?