Problem Set #4, 20 pts.

Econ 12, Fred Foldvary

Wednesday, September 26, 2001

Due Friday, September 28.

Production and cost

5 pts. each

Please put your name at the top right corner, First name then Last Name.

1. Explain the law of diminishing returns.

2. Given the cost equation during some time interval:

C = 100 + 10Q, where C is total cost and Q is the quantity of output,

what are the equations for average cost and marginal cost?

How much is the fixed cost?

3. At what portion of the marginal and average cost curves does profit-maximizing production take place? Explain why.

4. How is the marginal cost related to the marginal product?

5. Difficult bonus question: what is the marginal product of land at the margin of production if one may obtain all the land one desires for free?

(5 pts, but maximum for problem set is 20.)