Question 2: Consider a good that can be produced using the technology: C(q) = 1600 + 10q + 4q2 (a) Find and show in a diagram the Marginal Cost (MC), Average Variable Cost (AVC) and Average Total Cost (AC) for this technology. In your diagram identify the Short Run (SR) and the Long Run (LR) supply curve of a perfectly competitive firm using this technology, assuming that the fixed cost is sunk in the SR and avoidable in the LR. (b) Explain for what output levels the technology shows increasing returns to scale and for which decreasing returns to scale. (c) What does it mean for the market for this good to be a natural monopoly? For what outputs is that the case? (d) Suppose that the inverse demand function for this good is given by P(Q) = 240 - 2Q Explain whether the market is a natural monopoly or not (e) Suppose that there are n = 16 firms perfectly competitive firms able to use the technology in (a). Find the firm and industry short-run and long-run supply curve. (f) Suppose that the demand for the good is given by Q (p) = 1250 - 3p. Find the short run perfectly competitive equilibrium. Do you expect firms to be entering or exiting the market? (g) What is the long run perfectly competitive equilibrium in the market?Suppose that in Monrovia the consumer market basket is defined as three oranges, six cupcakes, and two quarts of milk. Furthermore, suppose you have the following price information. Year Price of oranges Price of cupcakes Price of milk 2011 $1 $2 $2 2012 $1 $3 $1 2013 $2 $4 $1 a) Use the above information to complete the following table. (3 points) Cost of market basket in 201 1 Cost of market basket in 2012 Cost of market basket in 2013 b) Using 2012 as the base year complete the following table. Calculate your answer to one place past decimal. (3 points) Year CPI with base year 2012 2011 2012 2013 c) Calculate the rate of inflation using the CPI you calculated in part (b) and fill in your results in the table below. Calculate the inflation rate to the nearest whole percent. (2 points) Year Annual Inflation Rate 2011 2012 2013Orange Juice (CTN) 15,000 lbs; cents per lb. May 12, 2003 Open July W Finv W 74.90 7730 8030 8330 High 82.30 83700 875775 88700 LOW 74.90 7730 8030 83700 Settle 82.20 83110 83775 8830 Lifetime High 128.50 mm 113.25 11935 Lifehe Low 73-00 7730 7930 82:75 . Suppose you are interested in purchasing the September futures contract. What is the futures price of 15,000 lbs. of orange juice for September delivery? A) $11,625 B) $12,330 C) $12,450 D) $13,863 E) $13,275 Ans: C Level: Basic . What was the lowest contract price at which 15,000 lbs. of orange juice for July delivery traded on the day quoted? A) $11,235 B) $11,625 C) $12,330 D) $12,075 E) $12,345 Ans: A Level: Basic Subject: Futures Quotes Type: Problems Subject: Futures Quotes Type: Problems Open Interest 17,832 6379 3717419 E39? In 2008, the policymakers of the economy of Eastlandia projected the debt-GDP ratio and the ratio of the budget deficit to GDP for different scenarios for growth of the deficit over the next 10 years. Real GDP is currently $1,000 Billion per year and is expected to grow by 3% per year; the public debt is $300 billion at the beginning of the year, and the deficit is $30 billion in 2008 Year Real GDP Debt Budget Deficit Debt Budget Deficit Billions of $) Billions of $) % of GDP) (X GDP) 2008 1,000 300 30 200 1,030 30 2010 1,061 30 2011 1,093 DE 2012 1,126 30 2013 1,159 30 2014 1,194 30 2015 1,230 30 2016 1,267 30 2017 1,305 30 2018 1,344 30 ) Complete the table above if the deficit remains constant at $30 for the entire period. Remember that the government's debt will grow by the previous year's deficit. b) Now redo the table given that the deficit now grows by 3% every year during the period. Year Real GDP Deb Budget Deficit Debt Budget Deficit Billions of $) (Billions of $) (% of GDP) %% GDP) 2008 1,000 300 30 1009 1,030 2010 1,061 2011 1,093 2012 1,120 201 1,159 2014 1,194 2015 1,230 2016 1,267 2017 1,30 2018 1,344 c) What happens to the Debt-GDP ratio and the deficit-GDP ratio for the economy over time under the different scenarios? d) Which scenario would be preferable for this country? Why