Reference no: EM133204511 , Length: Word count: 4 Pages
Question 1: Congress is considering a windfall profits tax on the oil industry similar to the one it levied in 1980. Discuss the effect of a windfall profit tax on an oil company's cost curves and on oil production. (The 1980 windfall profits tax was an excise tax set at a fixed amount per unit of production between some statutory selling price and the actual selling price of a barrel of oil).
Question 2: The Bullford Towers is a 20-story office building in downtown Charlotte. Due to frequent issues with the previously hired cleaning company, the building administration decided to hire a new company to provide that service. Based on the table shown below, which relates number of cleaning employees to offices cleaned, please answer the following questions:
| Cleaning Employees/evening |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
| Offices cleaned/evening |
0 |
6 |
14 |
24 |
32 |
34 |
34 |
32 |
A. What is the marginal product of the second janitor?
B. What is the average product of four janitors?
C. Is the addition of the third janitor associated with increasing, diminishing, or negative marginal returns? Explain.
D. Is the addition of the fourth janitor associated with increasing, diminishing, or negative marginal returns? Explain.
E. Is the addition of the seventh janitor associated with increasing, diminishing, or negative marginal returns? Explain.
F. Draw the total product, average product, and marginal product curves and shades the regions corresponding to increasing marginal returns, decreasing marginal returns, and negative marginal returns.
Question 3: Give an example of a firm that you would expect to have increasing returns to scale. How about decreasing returns to scale? Give your reasoning.