ECON 101 Lecture 9: Tutorial
This preview shows page 1 of the document.
Unlock all 3 pages and 3 million more documents.
ECON 101 Full Course Notes
Get access
Related Documents
Related Questions
5. A decision at the margin
Larry is a hard-working college freshman. On Saturday, he decides to work nonstop until he has answered 200 practice problems for his economics course. He starts work at 8:00 AM and uses a table to keep track of his progress throughout the day. He notices that as he gets tired, it takes him longer to solve each problem.
Time | Total Problems Answered |
---|---|
8:00 AM | 0 |
9:00 AM | 80 |
10:00 AM | 140 |
11:00 AM | 180 |
Noon | 200 |
Use the table to answer the following questions.
The marginal, or additional, gain from Larry's second hour of work, from 9:00 AM to 10:00 AM, problems.
The marginal gain from Larry's fourth hour of work, from 11:00 AM to noon, problems.
Later, the teaching assistant in Larry's economics course gives him some advice. Based on experience, the teaching assistant says, working on 70 problems raises a student's exam score by about the same amount as reading the textbook for 1 hour. For simplicity, assume students always cover the same number of pages during each hour they spend reading.
Given this information, to use his 4 hours of study time to get the best exam score possible, how many hours should he have spent working on problems and how many should he have spent reading?
0 hours working on problems, 4 hours reading
1 hour working on problems, 3 hours reading
2 hours working on problems, 2 hours reading
3 hours working on problems, 1-hour reading
A cupcake store is located in a mall and is the only cupcake store in that mall. The demand schedule for cupcakes (per dozen) is given in the table below. If the marginal cost to produce a dozen cupcakes is $4 per unit, how many units should the firm produce?
Price | Quantity Purchased | |
(Dozen per day) | ||
$12 | 3 | |
$11 | 7 | |
$10 | 12 | |
$9 | 20 | |
$8 | 35 | |
$7 | 60 | |
$6 | 100 | |
$5 | 160 | |
$4 | 250 |
1) What price should the cupcake store charge?
If the fixed cost for the firm is $100 per day, how much profit will the firm make in one day?
What is the price elasticity of demand at the optimal price/quantity combination (use the next lower price level was the second point in your calculation)?
Is the formula for finding the correct level of output in the middle of page 74 in your text satisfied? (Note there is a typo in the text; the equation should read (P-MC)/P > 1/|e|. )