Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

6. A rm has two inputs, lemons and sugar, for its candyr output. it purchases sugar for $100 a ton. For lemons, however, the pricing

image text in transcribed
image text in transcribed
6. A rm has two inputs, lemons and sugar, for its candyr output. it purchases sugar for $100 a ton. For lemons, however, the pricing is different Lemons cost $100 a ton for first 4 tons, and then $50 a ton for more. [a] [Iarefullpr draw the isocost curve for a case in which the rm spends $1000. Put lemons on the horizontal axis. [5 points] [h] Suppose that the isoquant for 5 million candies is tangent to this isocost curve in two places. Assume that the isoqnant is smooth and has the usual curvature, {eg. A Cohh- Douglas production function]. Draw it. [5 points) [c] Now suppose that the lemon sellers change their pricing plan. Lemons will now cost $100 per ton for the rst E and then $50 per ton thereafter. 1What is the direction of the effect on the profits of a manufacturer who was making 5 million candies? Explain. [5 points]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Economics

Authors: Luke M. Froeb, Brian T. McCann, Michael R. Ward

5th Edition

1337106666, 978-1337106665

More Books

Students also viewed these Economics questions

Question

3. It is the commitment you show that is the deciding factor.

Answered: 1 week ago