This task brief covers for 30% of your final grade in Microeconomics.
For Part I (50% weight) you need to reflect on the concepts digested, like trade off, scarcity, opportunity costs, elasticity, surplus, welfare, etc. All these applied to demand and supply schedules and curves.
For Part II (50%) the focus will be Theory of the Firm.
Case I: Elasticity
Demand and Supply are represented by the functions below:
QD = 8250 – 325P QS = 850 + 175P
1. Compute quantity and price in equilibrium
2. Determine what would happen if the price changed to 12$
3. Plot the graph representing the first two questions.
4. Compute the elasticity of both curves assuming the price would increase from 22$ to 24$.
5. Plot the graph for question 4.
Case I: When do we stop baking pizzas? Part II
Simeon’s Bakery has the production function per hour shown in the accompanying table. The hourly wage rate foreach worker is $9. Each pie sells for $6. Consider the following cost information for the bakery:
0 worker 0 14 27 3 10 4 12 5 13
a) Calculate the marginal product of labor for each worker and the value of the marginal product per worker.
b) Draw the value of the marginal product curve. Use your diagram to determine how many workers Simeon should employ.
c) Now the price of pies increases to $8. Calculate the value of the marginal product per worker and draw the new value of the marginal product curve into
your diagram. Use your diagram to determine how many workers Patron should employ now.