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ECON 471

Practice Questions for Topics 141 Suppose that the production of wheat in a fixedsize parcel of land is given by 05Y4L where L is the amount of labor devoted to farminga Taking market price of wheat P and the wage rate of labor W as given solve for the profitmaximizing choice of L and Y if the field is privately owned What is the rent profits generated by the field b Solve for the open access level of L and Y Hint the profits rent under open access regime is zero c Illustrates the open access and private property equilibrium in a diagram2 Suppose that there are N number of identical farmers and one open access field Each farmer supplies L units of labor for the total supply of NL The 05 Under open access each opportunity cost of labor is w Total harvest QNLlaborer gets the average return to their labor a Set up the objective of each farmer maximization problem b Determine each farmers optimal choice of labor c Assume that N in this case what is the optimal input of labor of each farmer d Let N1 What is the optimal input of labor of each farmer
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