Q1

Mohamed produces Toys in the perfectly competitive Toys market.

1. Fill in the missing values in the following table:

Output per week	Total Cost	FC	VC	AFC	AVC	ATC	MC
0	$100
1	150
2	175
3	190
4	210
5	240
6	280
7	330
8	390
9	460
10	540

1. Suppose the equilibrium price in the Toysmarket is $30. How many Toys should Mohamed produce? How much profit will he make?
2. If next week the equilibrium price of Toys drops to $15, should Mohamed shut down? Explain.

Q2

A publisher initially prices both hardback books and paperback books at $20 per book. The hardback version comes out first, followed two months later by the paperback version. The publisher initially sells the same number of hardbacks and paperbacks (100 each). Each book costs $2 to produce.

a. Complete the following table.

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	Price	Quantity	Total Revenue	Total Cost	Profit
Hardback	$20	100
Paperback	$20	100
Total		200

b. The price elasticity of demand for hardback (eager) buyers is 0.50, and the price elasticity of demand for paperback (patient) buyers is 2.00. Suppose the publisher increases the price for hardbacks by 10 percent and decreases the price of paperbacks by 10 percent. Complete the following table.

	Price	Quantity	Total Revenue	Total Cost	Profit
Hardback	$22
Paperback	18
Total

c. Doespricediscrimination increaseordecreasethe publisher'sprofit?

Q3

Suppose a firm producing baseball, it is operating in the short run. The price of baseball is $5, the hourly wage is $12, and each baseball requires$1worth of material. The firm has experimented with different workforces and the results are shown in thefirst two columns of the following table.

1. Fill in the blanks in thetable.

2. Is it sensible to continue to operate at a loss with 14workers?

3. Would it be better to operate with 15 workers? Explain,using the marginal principle.

Workers	Baseball	Labor Cost	Material Cost	Variable Cost	Total Revenue	Marginal Cost
14	56
15	60