Cost & Supply in Short Run and Long Run

1.A firm purchased copper pipes a few years ago at $10 per pipe and stored them, using them only as the need arises. The firm could sell its remaining pipes in the market at the current price of $9. What is the opportunity cost of each remaining pipe and what is the sunk cost?

1a.As a member of a local advocacy group for low-income families, you have been placed in charge of organizing a one-day seminar on welfare reform. The costs for the event are as follows:

Rent for auditorium:$5,000

Faculty:$2,500

Breakfast:$10 per person

Luncheon:$15 per person

Materials:$25 per person

Advertising:$1,500

2.What are the average variable costs of the seminar?

3.What are the fixed costs of the seminar?

4.Based on past events, you expect that 100 people will attend the seminar.What price should you charge each attendee so that the seminar breaks even?(Hint:to break even, price must equal the average total cost. It is different from the shut-down decision where price need to be at least as high as average variable cost.)

5.To encourage more young people to get involved, your supervisor suggests charging students a discounted rate.You decide to have students pay only the marginal costs of their attendance.What price should you charge students to attend the seminar?

6.This question asks you to consider the market for vitamins in the United States.For this question, please assume that there are many small vitamin manufacturers in the U.S. market, so that the market is perfectly competitive.

Begin by depicting the market for vitamins in long-run equilibrium.Usingtwodiagrams, one to represent the market for vitamins (withsupply and demand curves), and a second to represent the long run costs (LRAC and LRMC) of a typical vitamin manufacturer, illustrate the current price, quantity and profits of a typical vitamin manufacturer.Explain why you have drawn the curves as you did.

7.Suppose that the recent health care reform includes a provision providing substantial insurance premium discounts for any U.S. citizen who takes a daily vitamin (Hint: what is going to happen on the demand curve?).Show how such a mandate affects the short-run market equilibrium, price, and profits of a typical vitamin manufacturer.Using one diagram for the vitamin market and a second for a typical firm.