Question

Slices Workers 0.2 0.3 0.45 0.675 1.0125 MU Carrot Cake slices 11 $36.00 $32.40 $29.16 4 $26.24 $23.62 $21.26 $19.13 $17.22 $15.50 $13.95 $12.55 12 S11.30 $10.17 $9.15 0 000 von WN 1.51875 2.278125 3.4171875 5.12578125 7.688671875 11.53300781 17.29951172 25.94926758 38.92390137 Workers are paid S17/hour.

3. (4 points) Perfect competition and equilibrium.

(1 point) Put the demand and supply curves together (at the original productivity and wages). Taylor assumes that she is in a perfectly competitive market. How many slices will she sell? At what price?

Answer 1

Solution:

The Equilibrium condition exists when MC = MR.

In the given problem we can calculate MR by finding total revenue and then by MR will be the difference in TR

The MC cost can be calculated by finding the TC first TC = worker * Rate i.e. 17/ Hour. Then MC can be calculated using the change in TC.

Equilibrium is at 6 slices and the price is $8.60.

She will sell 6 slices at $8.60.

K L M N o 1 F А 1 Slice 3.4 Chart Title WEB CU AWN MU Carrot Cake Slice TR = Slice*MU 36 32.4 29.16 26.24 23.62 21.26 19.13 17.22 15.5 13.95 12.55 11.3 10.17 9.15 E MR = Change in TR Worker TC = Worker * Rate MC= Change in TC 36 36 0.2 3.4 64.8 28.8 0.30000 5.1 1.7 87.48 22.68 0.45000 7.65 2.55 104.96 17.48 0.67500 11.475 3.825 118.1 13.14 1.01250 17.2125 5.7375 127.56 9.46 1.51875 25.81875 8.60625 133.91 6.35 2.27813 38.728125 12.909375 137.76 3.85 3.41719 58.0921875 19.3640625 139.5 1.74 5.12578 87.13828125 29.04609375 139.5 0 7.68867 130.7074219 43.56914063 138.05 -1.45 11.53301 196.0611328 65.35371094 135.6 -2.45 17.29951 294.0916992 98.03056641 132.21 -3.39 25.94927 441.1375488 147.0458496 128.1 -4.11 38.92390 661.7063232 220.5687744 Price -MR MC 8 10 Slice