1. Production, Costs, and Perfect Competition: Firm in the Short Period

1. data

1. K = 7 and the price of capital = $2.00

1. quantity produced 0 1 2 3 4 5 6 7 labor input 0 2 5 914 20 27 35

price of labor = $2.00

1. questions

1. Derive the ATC, AFC, AVC, and MC curves.

1. Derive the marginal product schedule for labor and show why it makes the marginal cost curve slope upward.

1. If the market price is $12.00, how would the firm supply and what would be its economic profits?

1. If the market price is $2.00, how much would the firm supply and what would be its economic profits?

1. Derive the firm's supply curve and explain its shape.

1. [10 pts] Does moral hazard exist? How do you know? What evidence would you point to?
2. [10 pts] Compare and contrast the special interest and public interest theories of government intervention?
3. [10 pts] How would you expect the price elasticity of demand for health care to vary with health status?
4. [10 pts] What is meant by the term "behavioral economics"? Give three examples in which concepts from behavioral economics have been applied. In what ways has behavioral economics provided insights that standard neoclassical economics would not have provided.