Unit 3 Problem Set Name Team Name

Integrity Agreement I, (insert your name here), agree that all of the work in this presentation is my original work. I agree to keep this work to myself this year and for future years. I understand that if this work is not my own original work or if I share my original work with others, that I will be sent to my GLC for academic dishonesty. Digital Signature: type your full name here

Explicit and Implicit Costs (____/5) 1. Explain an example that demonstrates the “real world” application of each of the following. Define the terms in your own words and use examples that clearly demonstrate your understanding of each concept. Explicit and Implicit Costs (____/5) Type your answer in paragraph format. Please italicize your answer.

1b. The Law of Diminishing Marginal Returns (____/5) Type your answer in paragraph format. Please italicize your answer.

1c. Fixed Costs, Variable Costs, and Total Cost (____/5) Type your answer in paragraph format. Please italicize your answer.

1d. Economies of Scale and Diseconomies of Scale (____/5) Type your answer in paragraph format. Please italicize your answer.

2. Productivity and Costs Complete the worksheet “Production Function for Tony’s Hat Store” (____/10) -See worksheet

2b. Complete worksheet titled “Cost and Competitive Market Supply” (____/10) -See worksheet

2c. Explain the relationship between the marginal product curve and the marginal cost curve. In your response, explain why the marginal cost curve is “U” shaped using numerical examples. (____/5) Type your answer in paragraph format. Please italicize your answer.

3. Below is information regarding Cory’s Surfboard Inc 3. Below is information regarding Cory’s Surfboard Inc. Complete the table and do the following (____/5): Total Product Variable Cost (TVC) Total Cost (TC) Average Fixed Cost (AFC) Average Variable Cost (AVC) Average Total Cost (ATC) Marginal Cost (MC) $0 $100 1 60 2 90 3 130 4 180 5 250 6 340 7 490 8 680

*Insert a picture of your graph here 3a. On a large graph, plot the MC, AFC, AVC, and ATC curves from this data (____/5) *Insert a picture of your graph here

3b. EXPLAIN what would happen to each of Cory’s per unit cost curves if the price of Styrofoam blanks (a variable input) increases. How would the cost curves change if there were an increase in his rent (a fixed input)? Explain why the results are different. (____/5) Type your answer in paragraph format. Please italicize your answer.

3c. If the market for surfboards was perfectly competitive and the market price was $150, how many surfboards should Cory make and how much profit will he make for EACH surfboard? Draw the firms demand on your graph in a. Explain how you got your answer. (____/5) Type your answer in paragraph format. Please italicize your answer. Make sure that your graph from 3a includes the data requested from this question.

4. Complete the practice FRQ (This will be given to you in class and graded in class): a. In-class Practice FRQ (____/12) -See worksheet

5. Assume that apples are an inferior good 5. Assume that apples are an inferior good. Draw a perfectly competitive market for apples and a firm selling apples in the long run equilibrium where price is $10 and the firm’s equilibrium quantity is 50. For part a and b, explain the following situations graphically and in words (Draw and label side-by-side graphs for each). Insert a picture of your side by side graphs for the apple industry in long run equilibrium (before any changes occur). Use the information from the prompt above to identify price and quantity. Insert a picture of your side by side graphs for the apple industry in long run equilibrium. Use the information from the prompt above to identify price and quantity.

5a. EXPLAIN what happens in the short-run if incomes increases by 15% 5a. EXPLAIN what happens in the short-run if incomes increases by 15%? ( ____/5) Type your answer in paragraph format. Italicize your answer. This slide you are explaining your graph from the previous slide (the graph that showed what would happen in the apple industry if income increased by 15%)

Graph for 5a “Income increases by 15%” On this slide, insert a picture of your side by side graphs for the given situation. Make sure you start at the LR equilibrium point given and show how the given situation would affect the graph for the apple industry. (from LR to SR) On this slide, insert a picture of your side by side graphs for the given situation. Make sure you start at the LR Equilibrium point given on the previous slide and show how the given situation would affect the graph for the apple industry

5b. EXPLAIN the process by which this market returns to the long-run equilibrium ( ____/5) Type your answer in paragraph format. Italicize your answer. This slide you are explaining your graph from the previous slide (the graph that showed how the apple industry would go from short run equilibrium (established in 5a) back to long run equilibrium.

Graph for 5b “Apple industry returns to LR euilibruim” On this slide, insert a picture of your side by side graphs for the given situation. Make sure you start at the short run response to the change identified in 5a. From here, graph how this industry would return to long run equilibrium. (SR to LR) On this slide, insert a picture of your side by side graphs for the given situation. Make sure you start at the short run response to the change identified in 5a. From here, graph how this industry would return to long run equilibrium.

Turnitin.com Receipt Attach a copy of your turnitin.com receipt from your final submission (February 6, 2014) Attach a copy of your turnitin.com receipt from your final submission (February 6, 2014)

6. Turn It In Receipts ( _____/8) -See ‘stamp sheet’ 7 6. Turn It In Receipts ( _____/8) -See ‘stamp sheet’ 7. Format ( _____/5)

1. _____/20 5._____/10 2. _____/25 6. _____/8 3. _____/20 7. _____/5 4._____/12 Total: _____/100 Peer Graded by: (insert name here)