Using ANY homework site, such as Chegg, is a violation of the Student Code of Conduct and will result in a zero for the assi

• Using ANY homework site, such as Chegg, is a violation of the Student Code of Conduct and will result in a zero for the assignment.
• The problem set answers should only contain answers. Do not retype the questions.
• Answers for the problem set have to be typed using 12 point black font and double spaced. 
• All answers are to be black font,  typed, including any calculations.
• Answers should be given in a paragraph form that provides a thorough explanation. A one sentence answer is not adequate. Even in the case of calculations, they should be explained. 
• Graphs are to be neatly hand drawn. 
• Graphs are to be clearly labeled
• Graphs are to be inserted into the paragraph of the answer

1. The Yarn Barn is operating in a purely competitive market. They are operating at an output of 1,000 skeins of yarn. The price of a skein of yarn is $12. The firm’s costs are the following, marginal cost is $12, average total cost is $11 and average variable cost is $10.
   1. Is the firm producing at its optimal level of output? Why or Why not? Explain
   2. Should the Yarn Barn continue to produce in the short run or should they shut down? How do you know? Explain and be sure to include a graph in your answer.
   3. Should the Yarn Barn continue to produce in the long run? How do you know? Explain and be sure to include a graph in your answer.

2. A small company that shovels sidewalks and driveways has 100 homes signed up for its services this winter. It can use various combinations of capital and labor: intensive labor with hand shovels, less labor with snow blowers, and still less labor with a pickup truck that has a snowplow on front. To summarize, the method choices are:
   1. Method 1: 50 units of labor, 10 units of capital
   2. Method 2: 20 units of labor, 40 units of capital
   3. Method 3: 10 units of labor, 70 units of capital

If hiring labor for the winter costs $100/unit and a unit of capital costs $400, what is the best production method? What method should the company use if the cost of labor rises to $200/unit?

3. Briefly explain why a graph is used in a budget constraint model between two goods and include a description of how the graph would appear. Explain the significance of the budget constraint line and how the marginal utility of the two goods changes. How would a sensible economizer choose based on marginal comparison between one good and another that costs twice as much?

4. Draw the demand curve, marginal revenue, and marginal cost curves from , and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopoly’s product increases dramatically. Draw the new demand curve. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you?

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