1. You manage a plant that mass-produces Spiff rocket engines by teams of workers using assembly machines. The technology is summarized by the production function q = 5*KL where q is the number of engines per week, K is the number of assembly machines, and L is the number of labor teams. Each assembly machine rents for r = $10,000 per week, and each team costs w =$5000 per week. Engine costs are given by the cost of labor teams and machines, plus $2000 per engine for raw materials. In the short run, your plant has a fixed installation of 2 assembly machines as part of its design. a. What is the short run cost function for your plant - namely, how much would it cost to produce q engines? What are short run average and marginal costs for producing q engines? . How many teams of labor are required to produce 250 engines in the short run? What is the average cost per engine in the short run? c. You are asked to make recommendations for the design of a new production facility. What capital/labor (K/L) ratio should the new plant accommodate if it wants to minimize the total cost of producing at any level of output q in the long run? d. What is the long run costs of producing 250 engines? . What is the long run cost function for the firm? 2. Suppose you are given the following information about a particular industry: Market Demand: Q" = 6500 - 100P Market Supply: Q$ = 1200P Firm cost function: C(q) = 800 + q2/200 Firm marginal cost function: MC(q) = 2q/200 = q/100 Assume that all firms are identical, and that the market is characterized by perfect competition. a. Find the equilibrium price, the equilibrium quantity, the output supplied by each firm, and the profit of each firm in the short run. b. What is each firm's short run shut down price? . Would you expect to see entry into or exit from the industry in the long run? Explain. d. What is the lowest price at which each firm would sell its output in the long run? e. How many firms enter would enter the market? (Partial firms are OK) 3. Nittany Airlines (NA) flies from Harrisburg to University Park. The demand for each flight is given by Q = 500 - P. NA's cost of running each flight is $30,000 plus $100 per passenger. a. At what price should NA charge per flight in order to maximize profit? b. How many people are on each flight? c. How much profit does NA make per flight