midterm question

4. Short questions (10) a) Assume that the total cost of firms in an industry is given by C = y and there are no fixed costs. Demand is given by y = 501 - p. In the long run, what will be the price in this market, how many firms will operate in it and what output each firm will produce? (2) b) Assume that there are three countries (A, B and C) and three products they can produce and trade. An economist working for country A predicts that when countries start to open up their borders and reduce tariffs, each country will specialize its production to a single product. Based on what you know about supply curves and cost functions, speculate on how this prediction may be motivated. (2) c) A farm produces 50 bushels of apples per year. Apples can be sold in a nearby city for 5 TL per bushel. The cost of production per bushel is 3 TI and the transportation costs per bushel is 0.1 TL per kilometer. How far should the farm be from the city for its rent to be worth 100 TL per year? (2) d) In many countries, the retirement system is pay-as-you-go, meaning that the working age population pays taxes to pay for the retirement benefits of the elderly. Explain how this retirement system can lead to an argument for child benefits and child care subsidies to families with children. (3)