HW#4_AGEC1113_Sp23

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Oklahoma State University *

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1113

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Economics

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Feb 20, 2024

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Name AGEC 1113 Homework #4 -Total 20 points Chapter 4: Profit Maximization Due: Thursday, Feb 23 by midnight (upload as pdf or jpeg or word file) 1. Complete the table (0.5 pts per cell= total 8pts). Assume the price of feed is $22 per bag and the price of beef is $6 per pound. Use the completed table to answer the questions on the next page. Note units: Px = $22 per bag, where X is input of feed in bags; and Py = $6 per lb, where Y is output in beef in lbs X (feed in bags) Y (beef in lbs) TRP TFactorC Profit MRP MFC 0 0 1 5 2 15 3 30 4 40 5 44 6 42 7 40 8 38 a. What is the equation to compute profit in this table? (1 point) b. What level of feed produces the largest TPP? (1 point) c. What level of input yields the largest profit value? (1 point) d. Use the values of marginal revenue product and marginal factor cost to determine the optimal input level. The optimal number of bags of feed occurs when moving to bags of feed. (1 point)

2. Use the graph below to answer the questions that follow (total 8 pts.): ($ / Y) a. What is the full name of curve A (no abbreviations)? (1 point) b. What is the full name of line B (no abbreviations)? (1 point) c. What label should be on the horizontal axis at point E (no abbreviations)? (1 point) d. What is MFC equal to? (1 point) P X or P Y e. Which point is the profit-maximizing level? (1 point) C or D f. State the two-part rule used to find the answer in part e. (1 point) g. On the graph above, draw in a new higher input price and show the new profit-maximizing level. Label the new optimal level of input X*. Is the new optimal input level higher or lower than your answer in part e? (2pts.) A B C D E

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