Question

5) Suppose a consumer of oranges and tangerines is currently in equilibrium. If the price of tangerines falls, the consumer will attempt to restore equilibrium by:

A) buying more oranges B) buying fewer tangerines C )buying more tangerines D) A and B E) None of the above

6) Jasper LLC's total cost is $10500 and the average total cost is $17.50; how many units are they producing?_________

7) When Jasper LLC produces Q=700, ATC=17.50; what is TC?____________

Refer to questions #5, #6, and #7. Jasper LLC is experiencing

A) economies of scale.B) constant returns to scale.C) diseconomies of scaleD) a labor shortage

Answer 1

Question 5

A consumer is at present is in equilibrium consuming oranges and tangerines.

This means that,

MU_T/P_T = MU_O/P_O

Now, price of tangerine falls.

So,

MU_T/P_T > MU_O/P_O

To restore equilibrium, consumer has to buy tangerines till consumer equilibrium condition is attained once gain.

Thus,

The correct answer is the option (c).

Question 6

Total cost = $10,500

Average total cost = $17.50

Calculate the number of units produced -

Number of units produced = Total cost/Average total cost = $10,500/$17.50 = 600

The number of units produced is 600 units.

Question 7

Q = 700

ATC = $17.50

Calculate the total cost -

Total cost = ATC * Q = $17.50 * 700 = $12,250

The Total Cost is $12,250.

Question 8

When 600 units are produced, ATC is $17.50

When 700 units are produced, ATC is $17.50

ATC remained same as output produced increases.

So,

Jasper LLC is experiencing constant returns to scale.

Hence, the correct answer is the option (B).