1. A cow will produce 8500 lbs. of milk if fed either 5000 lbs. of hay and 6200 lbs. of grain or 5600 lbs. of hay and 5400 lbs. of grain.  Over this range, the marginal rate of technical substitution between hay and grain is
 
 
 
 
 
 
 

Following is a firm's expansion path.  The price of capital is $5 per unit; the price of labor is $2 per unit.
 

                                   Optimal Input Choice
Units of Output   Units of Capital   Units of Labor
         10                        6                       5
         20                        8                     10
         30                      13                     20
 

2. When output is 30 units, what is long?run total cost?
 
 
 
 
 
 

3. When output is 20 units, what is long?run average cost?
 
 
 
 
 
 

4. A perfectly competitive firm in the short run will
a. Produce the output at which _____________________ equals __________________ and make an economic profit if price exceeds __________________.
b. Produce the output at which __________________ equals __________________ and make a loss if price is between __________________ and __________________.
c. Shut down if price is below ________________________ and make a loss of __________________.
5. A perfectly competitive firm earns $1 million revenue in a year.  Its cost of payroll, materials, rent, and supplies is $700,000.  The owner invested $2,000,000 in the firm and could have earned 8% if the firm not used the $2,000,000 investment.  Normal profit is $____________ and economic profit is $____________.
 
 

The next two questions refer to the following figure:
 

These are the cost curves for a perfectly competitive firm.

6. If market price is $5, how much output will the firm produce?
 
 
 
 

7. If market price is $5, how much profit will the firm earn?