Problem 5 (5 points)

Caroline has a cookie factory, with fixed cost $100. The table below shows total product and marginal cost for Caroline's firm.

Compute all various related measures of costs

Caroline is increasing the bookkeeper's salary. How does this affect the various measures of cost? Caroline's small business is a franchise, and she pays a percentage of her sales revenue to the company that grants Caroline the franchising rights. How does this affect the various measures of cost? Explain with words + graph

total

Marginal

product

cost ($)

0

1 90

2 80

3 70

4 60

5 60

6 90

7 90

8 110

9 130

10 150

Problem 6 (7 points)

The state of Kansas, is increasing the cost of fungicide and insecticide used by growers of blueberries. The most impacted will be Shawne County growers, who produce about 80% of the nation's crop. Illustrate this situation with graphs for the blueberries market and the Shawne County grower. Start with the situation in long run equilibrium before the cost of fungicide and insecticide increase. Next, show and discuss the short run and long run effects of the fungicide and insecticide cost increase. Explain with words + graphs