Econ 342 Homework #1 McLeod Due on Canvas by 11:59 pm, Sunday, February 6th, 2022. LATE HOMEWORK WILL NOT BE ACCEPTED. Name ______________________________________________________ ID # ________________________________________________________ Instructions: Please Read Carefully Please download and print out this form. After you have written your answers, scan it and upload it to Canvas. There are 50 possible points on this homework assignment. This study source was downloaded by 100000858468549 from CourseHero.com on 02-05-2023 12:29:19 GMT -06:00 https://www.coursehero.com/file/131480709/Econ-342-Homework-1-Answer-Key-Spring-2022-1docx/ 1. (20 points) Suppose honey is produced in a beehive using bees and sugar. Each honey producer uses one beehive which she rents for $40/month. Producing q gallons of honey in one month requires spending 4q dollars bees, and 2q2 dollars on sugar. a) (4 points) What is the total cost of producing q units of honey for an individual honey producer in a given month? TC = 40 + 4q + 2q2 b) (4 points) In general, if the total cost of producing honey is a + bq + cq2 , then the marginal cost of producing honey is b + 2cq. Assuming each honey producer operates as a price-taker, what is the monthly supply curve for an individual producer? P = 4 + 4q This study source was downloaded by 100000858468549 from CourseHero.com on 02-05-2023 12:29:19 GMT -06:00 https://www.coursehero.com/file/131480709/Econ-342-Homework-1-Answer-Key-Spring-2022-1docx/ c) (4 points) Let Q be the total market supply, and q is the supply of an individual firm. Therefore, q = Q/n where n is the total number of firms in the market. Suppose the demand for honey is given by Q = 548-4P. Also, suppose there are 60 honey producers in the market. What is the equilibrium price of honey? P = 32 d) (4 points) How much profit does an individual producer make in a month? q = 7 (2 points) TR = 7*$32 = $224 (1 point) TC = 40 + 4(7) + 2 (7^2) = 166 (1 point) Profit = TR – TC = $58 Each firm makes a profit of $58 so this is NOT a long run equilibrium. Other firms will enter the market which will increase market supply and decrease the market price. This study source was downloaded by 100000858468549 from CourseHero.com on 02-05-2023 12:29:19 GMT -06:00 https://www.coursehero.com/file/131480709/Econ-342-Homework-1-Answer-Key-Spring-2022-1docx/ e) (4 points) How many firms will there be in long run equilibrium? (Remember, a firm will enter the market as long as it can make a positive profit, otherwise a firm will not enter the market.) n = 102 (103 is okay) To get this, find the breakeven price by setting MC = ATC. So 4 + 4q = (40 +4q + 2q2 )/q. Solving for q, we get q = 201/2. So the breakeven price = 4 + 4*201/2 = 21.89. Substituting for P in the demand curve, Q = 548 – 4 (21.89) = 460.45. n = Q/q = 102 .96