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Homework #4
Economics 102 – MicroeconomicsProfessor SchenkDue: July 27, 20081.Presume a firm is manufacturing Widgets. Below is the cost schedule for theproduction from 1 to 10 goods.QuantityVariableCostFixedCost TotalCostMarginalCostAVCAFCAC1$11$1202201203271204321205401206541207701208100120913512010175120a.Calculate the Total Costb.Calculate the Marginal Cost (by definition the fixed cost for producing 0is $120 and the variable cost is $0)c.Calculate the Average variable cost, average fixed cost, and averagetotal cost.d.What are the break-even and shut-down prices?
 
2.Presume a consumer has a choice between Doodad and Widgets. Widgets isthe same product manufactured in question #1.a.Assume the price of Doodads was $200 and the budget constraint is$2,000. Calculate the number of Widgets consumed when the price of Widgets is $100, $200, and $400.Price =$200Price =$100Price =$200Price =$100Price =$200Price =$100DoodadWidgetDoodadWidgetDoodadWidget101010999888777666555444333222111000
 
b.Below are three indifference curves: X, Y, and Z. Note thatconsumption along Z is preferred to Y and Y is preferred to X. Draw thethree budget constraints from 2a and all three indifference curves on aseparate graph. What is the optimal consumption of Widgets when theprice is $100, $200, and $400?
IndifferenceCurve 1IndifferenceCurve 2IndifferenceCurve 3
DoodadWidgetDoodadWidgetDoodadWidget108104101510372441521319
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