• November 1st, 2018

ECON312 week 3 Homework 2018

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Question 1
Maryland farmers turn from tobacco to flowers
Maryland tobacco farmers will be subsidized if they switch from growing tobacco to growing crops such as flowers and organic vegetables. How does offering farmers a payment to exit tobacco growing influence the opportunity cost of growing tobacco? What is the opportunity cost of using the equipment owned by a tobacco farmer?
Offering farmers a payment to exit tobacco growing _______ the opportunity cost of growing tobacco.
The opportunity cost of using the equipment owned by a tobacco farmer is _______.
increases; the next best alternative forgone, which could be the production of flowers and organic vegetables
increases; the implicit cost of using the tobacco equipment
decreases; the explicit cost of using the tobacco equipment
decreases; the sum of the implicit and explicit costs of using the tobacco equipment
does not change; the next best alternative forgone, which could be the production of flowers and organic vegetables
Question 2
Perfect competition is characterized by all of the following EXCEPT
firms produce an identical product.
no restrictions on entry into or exit from the industry.
buyers and sellers are well informed about prices.
a large number of buyers and sellers.
considerable advertising by individual firms.
Question 3
Which of the following illustrates economies of scale, diseconomies of scale, and constant returns to scale?
Liza’s average total cost changes from $4.50 to $2.20 when she increases salad production from 7 to 9 an hour.
Sam’s average total cost changes from $1.30 to $2.80 when he increases smoothie production from 5 to 8 gallons an hour.
Tina’s average total cost remains at $3 when she increases pizza production from 12 to 13 an hour.
Sam faces economies of scale; Liza faces diseconomies of scale; Tina faces constant returns to scale.
Sam faces economies of scale; Tina faces diseconomies of scale; Liza faces constant returns to scale.
Tina faces economies of scale; Sam faces diseconomies of scale; Liza faces constant returns to scale.
Liza faces economies of scale; Sam faces diseconomies of scale; Tina faces constant returns to scale.

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