3.(9N10.8) Suppose that the long-run total cost function for the typical mushroom producer is given by: ( , ) 2 cqw wq q =-+ 10 100 where q is the output of the typica1 firm and w represents the hourly wage rate of mushroom pickers. Suppose also that the demand for mushrooms is given by Q = -1,000P+ 40,000 where Q js total quantity demanded and P is the market price of mushrooms. A. If the wage rate for mushroom pickers is $1, what will be the long-run equilibrium output for the typical mushroom picker? B. Assuming that the mushroom industry exhibits constant costs and that all firms are identical, what will be the long-run equilibrium price of mushrooms, and how many mushroom firms will there be? ( , ) 2 C. Suppose the government imposed a tax of $3 for each mushroom picker hired (raising total wage costs, w, to $4). Assuming that the typical firm continues to have costs given by: cqw wq q =-+ 10 100 how will your answers to parts (a) and (b) change with this new, higher wage rate?
3.(9N10.8) Suppose that the long-run total cost function for the typical mushroom
producer is given by:
( , )
2
cqw wq q
=-+
10 100
where q is the output of the typica1 firm and w represents the hourly wage rate of
mushroom pickers. Suppose also that the
Q = -1,000P+ 40,000
where Q js total quantity demanded and P is the market
A. If the wage rate for mushroom pickers is $1, what will be the long-run equilibrium
output for the typical mushroom picker?
B. Assuming that the mushroom industry exhibits constant costs and that all firms are
identical, what will be the long-run
mushroom firms will there be?
( , )
2
C. Suppose the government imposed a tax of $3 for each mushroom picker hired (raising
total wage costs, w, to $4). Assuming that the typical firm continues to have costs given
by:
cqw wq q
=-+
10 100
how will your answers to parts (a) and (b) change with this new, higher wage rate?
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