1) Suppose the price elasticity of demand for wheat is 1.80 in the long-run, and 0.40 in the short-run. a) If the price of wheat rises from $5.85 per...

1)

Suppose the price elasticity of demand for wheat is 1.80 in the long-run, and 0.40 in the short-run.

a)    If the price of wheat rises from $5.85 per bushel to $6.15 per bushel, what is the percentage change (using the midpoint method) in quantity-demanded in the:

                                i.        long-run

                               ii.        short-run

b)   Explain why the change in quantity-demanded would be greater in the long-run than in the short-run.

2)

Acme, Inc. is a specialty coffee restaurant. The following table shows the relationship between the number of workers and Acme's output in any given day. You also know that Acme has total fixed costs of $120 per day, and each worker costs $ 80 per day. 

a)    Fill in the blanks for each of the columns (MP, TC, ATC, MC)

b)   What is the relationship between MP and MC? Why?