What is the most that you would be willing to pay for an Ipod if you couldn

1
What is the most that you would be willing to pay
for an Ipod if you couldnt get them any cheaper?

1. 600 or more
2. 500
3. 450
4. 400
5. 350
6. 300
7. 250
8. 200
9. 150
10. 100 or less

2
A firm can hire labor for 50 per worker. It
has no other costs. The value of its output is
shown in the table below.To maximize profits, how
many laborers should it hire?
Number of workers Value of output
1 200
2 300
3 360
4 400
5 420

1. 1
2. 2
3. 3
4. 4
5. 5

3
Why is that?

• Compare wage to marginal value product. Wage
  is 50.

laborers Val output MVP
1 200 200
2 300 100
3 360 60
4 400 40
5 420 20
4
A competitive firm can sell its output at 10 per
unit. The firms total costs are shown below. To
maximize its profits how many units should it
produce?
Output Total cost
1 5
2 14
3 27
4 36
5 48

1. 2
2. 3
3. 4
4. 5
5. More than 5

5
Why is that ?

• For a competitive firm, producing an extra unit
  will increase profit if marginal cost is smaller
  than price and decrease profit if marginal cost
  is larger than price.
• Marginal cost of first unit 5, second unit 9,
  third unit 13, etc..
• Price of output is 10.

6
For a monopoly that faces a downward sloping
demand curve, marginal revenue from selling an
extra unit is equal to the price at which it can
sell that unit.

1. True
2. False

7
Why is that?

• Listen to todays lecture.