Question

Labor Quantity Price MPI Wage Per Unit Marginal Rate Product of Labor 0 $100 $50 5 $105 $50 12 $10 7 $50 30 $10 18 $50 43 $10 13 $50 52 $109 $50 60 $108 $50 64 $10 4 $50 OU UN-O TFC TVC TC M C AVC ATC Marginal Total Total Total Total Marginal Average Average Revenue Revenu Fixed Variable Cost Cost Variable Total Cost Cost Cost Cost 2000 200 - - - $100 200 50 250 10 10 50 $ 10 $50 200 100 300 7.14 8.33 25 $ 10 $120 200 150 350 2.78 5.00 11.67 $ 10 $300 200 200 400 3.84 4.65 9.30 $ 10 $430 200 250 450 5.56 4.818.65 $ 10 $520 200 300 500 6.255.00 8.33 $ 10 $600 200 350550 12.50 5.47 8.59 $10 $640

Answer 1

Short run price level is $10 and at this level the average total cost is 8.33 , for a production of 6 units. this indicates that currently they are economic profits and in the long run new firms will enter the market. they will increase the supply and as the market supply increases the price will decline reducing all the profit down to zero. In the long run there will be no economic profit

Option D is correct for question 30

Option B is correct for question 31.