Fixed Cost. Marginal Cost. Fixed Cost. Marginal Cost


 Erin Powers
 4 years ago
 Views:
Transcription
1 1. Complete the following table (round each answer to the nearest whole number): Output Total Variable Fixed Marginal Average Avg. Var. Avg. Fixed Output Total Variable Fixed Marginal Average Avg. Var. Avg. Fixed A firm's total cost function is given by the equation: TC Q + 10Q. (1) Write an expression for each of the following cost concepts: a. Total Fixed b. Average Fixed c. Total Variable d. Average Variable e. Average Total f. Marginal () Determine the quantity that minimizes average total cost. Demonstrate that the predicted relationship between marginal cost and average cost holds. PART (1) a. TFC 4000 SD&GY_01101/
2 b AFC Q c. TVC TC TFC TVC 5Q + 10Q d. AVC TVC 5Q + 10Q Q Q Q e. ATC TC Q + 10Q Q Q f. MC 5 + 0Q SD&GY_01101/
3 PART () ATC is minimized where MC is equal to ATC. Equating MC to ATC Q + 10Q Q 5+ 0Q Q Q + 0Q Q Q 400 Q 0 SD&GY_01101/
4 ATC is minimized at 0 units of output. Up to 0, ATC falls, while beyond 0 ATC rises. MC should be less than ATC for any quantity less than 0. For example, let Q 10: MC 5 + 0(10) ATC 10 ( ) + 10( 10) 505 MC is indeed less than ATC for quantities smaller than 0. MC should exceed ATC for any quantity greater than 0. For example, let Q 5: MC 5 + 0(5) ATC ( 5) + 10( 5) MC is indeed greater than ATC for quantities greater than Acme Container Corporation produces egg cartons that are sold to egg distributors. Acme has estimated this production function for its egg carton division: Q 5, where Q output measured in one thousand carton lots, labor measured in person hours, and capital measured in machine hours. Acme currently pays a wage of $10 per hour and considers the relevant rental price for capital to be $5 per hour. Determine the optimal capitallabor ratio that Acme should use in the egg carton division. Equate MRTS to w r..6.4 ( 5) ( 5) MRTS 15 MRTS 10 MRTS ; SD&GY_01101/
5 4. Davy Metal Company produces brass fittings. Davy's engineers estimate the production function represented below as relevant for their longrun capitallabor decisions. Q , where Q annual output measured in pounds, labor measured in person hours, capital measured in machine hours. The marginal products of labor and capital are: Davy's employees are relatively highly skilled and earn $15 per hour. The firm estimates a rental charge of $50 per hour on capital. Davy forecasts annual costs of $500,000 per year, measured in real dollars. a. Determine the firm's optimal capitallabor ratio, given the information above. b. How much capital and labor should the firm employ, given the $500,000 budget? Calculate the firm's output. c. Davy is currently negotiating with a newly organized union. The firm's personnel manager indicates that the wage may rise to $.50 under the proposed union contract. Analyze the effect of the higher union wage on the optimal capitallabor ratio and the firm's employment of capital and labor. What will happen to the firm's output? a MRTS MRTS 0.75 w 15 Equate to. r ; SD&GY_01101/
6 b. c. C 500,000 C w + r 500, from optimal ratio 500, () 500, , Substitute to solve for. Substitute into C: 14,85.71 or 14,86 hours 500,000 15(1486) ,000 14, , or 5714 Q 500(14,86) (5,714) 0.8 Q 157,568,191 MRTS 0.75 w.5 New 5 r 50 w.5 Equating MRTS to. r , , () 500, , ,53.8 or 9,54 fell from 14,86 to 9,54. Substitute to solve for. remains constant. 500,000.50(9,54) , ,714.0 or 5,714 SD&GY_01101/
7 5. Q 500(954) (5714) 0.8 Q 13,541,771.8 Output fell from 157,568,0.5 to 13,541, a. Homer's boat manufacturing plant leases 50 hydraulic lifts and produces 5 boats per period. Homer's shortrun cost function is: C ( q, ) , where q is the number of boats produced and is the 5 q 5 number of hydraulic lifts. Homer's longrun cost function is: ( ) 10 7 C q q. At Homer's current shortrun plant size, calculate Homer's shortrun average total cost of production. If Homer would lease 11 more hydraulic lifts in the short run, will his shortrun average total cost of producing 5 boats increase or decrease? Does Homer's longrun cost function exhibit increasing, constant, or decreasing returns to scale? R At Homer's current shortrun plant size, Homer's shortrun average total cost of production is: 5 15( 5) ( 50) ( 50) ATC (5, 50) If Homer leases an additional 11 hydraulic ( 5) + 00( 61 5 ) ( 61) lifts, shortrun average total costs become: ATC (5, 61) We 5 see that Homer's shortrun average total costs decrease if he uses 11 additional hydraulic lifts. ( ) CR q q Homer's longrun average costs are: ACR ( q) q. Since q q longrun average costs increase as output increases, Homer's production process has decreasing returns to scale. b. Marge's Hair Salon uses 15 hair dryers to produce 10 units of output per period. Marge's shortrun cost 15q function is: C ( q, ) + 1, where q is the number of units produced and is the number of hair dryers Marge leases. Marge's longrun cost function is: C ( q) 6.8 q. If Marge used 4 fewer hair dryers in the shortrun, would shortrun average total costs increase or decrease? Does Marge's longrun cost curve exhibit increasing, constant, or decreasing returns to scale? R ( 15) 15 10, If Marge uses 4 fewer hair dryers in the short run, her shortrun average total costs become: 15( 10) + 1( 11) 11 SRATC ( 10,11) If Marge uses 4 fewer dryers and produces units, here shortrun average total costs decrease. Marge's longrun average costs are: CR ( q) 6.8q RAC 6.8. We see that Marge's longrun average costs are constant. q q This implies that Marge's cost curve exhibit constant returns to scale. Currently, Marge's shortrun average costs are: SRATC ( ) ( ) SD&GY_01101/
8 c. Apu leases squishy machines to produce 40 squishies in the short run. Apu's shortrun cost function is: q C ( q, ) , where q is the number of squishies produced and is the number of squishy machines used. Apu's longrun cost function is: ( ) 3 C q 1.13 q. If Apu decides to lease 7 squishy machines, what happens to Apu's shortrun average total cost of producing 40 squishies? Does Apu's longrun cost function exhibit increasing, constant, or decreasing returns to scale? R ( 40) ( 7) With squishy machines, Apu's shortrun average total costs are: ( 40) ( ) ( ) SRATC ( 40, ) If Apu leases 7 squishy machines, his short ( 7) run average total costs become: SRATC ( 40, 7) easing 5 40 additional squishy machines lowers Apu's shortrun average total cost by 91%. Apu's longrun average cost curve is: RAC ( q) q Since Apu's longrun average costs q q 3 decrease as output increases, Apu's cost curve exhibit increasing returns to scale. 6. The cost of producing 600 small fiberglass sailboats per year, and the cost of producing sails and fittings necessary to make the boats seaworthy in a single plant, are together $780,000. If produced in separate plants, the boats would cost $540,000, and the sails and fittings would cost $180,000. From this information, what can be learned about (1) economies of scale and () economies of scope in the production of sailboats, sails, and fittings? Perform any necessary calculations and explain. The above information says nothing about economies of scale. However, one can calculate the degree of economies of scope. Use equation (7.7). C Q SC ( 1) + C( Q ) C( Q 1,Q ) C( Q,Q ) 540, , , , Since SC is negative but close to zero, there are slight diseconomies of scope. q 16, where q is the number of units 3 A 8 produced and A is the time in months that eann's manager has spent on the job. What happens to production costs as the manager gains more experience on the job? Is this experienceeffect common in production processes? 7. eann's Telecommunication firm longrun cost curve is: C ( q) 3 4 Increases in A will reduce the average cost of production for any quantity. This implies that as the manager gains job experience, eann's cost of production will decrease. SD&GY_01101/
9 Suppose that eann is producing 16 units and the manager has 1 month experience. eann's costs are: ( ) ( 16) ( 1) experience, eann's costs are: C ( ) 3 4 C If eann's manager has 56 months of 3 8 ( 16) ( 56) This experienceeffect of the manager is referred to in economics as a "learningcurve" effect. Many production processes exhibit a learningcurve effect. That is, more time spent performing an activity results in greater efficiency and smaller costs. 8. Murray Manufacturing Company produces pantyhose. The firm's production function is given as: Q 5, where Q pairs of pantyhose, labor measured in person hours, and capital measured in machine hours. Murray's labor cost, including fringe benefits, is $0 per hour, while the firm uses $80 per hour as an implicit machine rental charge per hour. Murray's current budget is $64,000 per month to pay labor and capital. a. Given the information above, determine Murray's optimal capital/labor ratio. b. Using the agrangian technique, determine the quantities of labor and capital that will allow the firm to maximize output given their budgeted input expenditure. What is the firm's output? c. Again using the agrangian technique, demonstrate the duality in production and cost theory. 3 8 a. optimal capital/labor ratio w r Q 5 Q Equating w r : SD&GY_01101/
10 b. agrangian is to maximize Q subject to cost constraint. Max Q 5 subject to 64, Form the agrangian function G 5 + λ(64, ) G 5 + λl64,0000λ  80λ First order conditions are: ( 1) ( ) ( 3) G 50λ 0 G 580λ 0 G 64, λ Solve (1) and () to eliminate λ. 5 0λ λ λ λ Solve with expression for G. λ 64, , , , (1600) SD&GY_01101/
11 1600, 400 Q 0.5(1600)(400) Q 3,00,000 c. To demonstrate duality one must show that cost minimization approach leads to same answer as maximizing quantity. Minimize C subject to 3,00,000 5 Form agrangian function: G * λ(3,00,0005) G * λ3,00,0005λ First Order Conditions are: ( 1) ( ) * G 05λ 0 * G 805λ 0 G λ ( 3) 3,00, Solve 1 and to eliminate l. 05λ λ 0 0 /  5 λ 0 80 /  5 λ 0 0 /  80 / 0 Combine with 3 to solve for and. 0 /  80 / 0 3,00, SD&GY_01101/
12 Multiply top equation by ,00, ,00, ,00, ,00, ,00,000,560, ,00,0005(1600) ,00, We find the identical and as with output maximization approach. SD&GY_01101/
Econ 101: Principles of Microeconomics
Econ 101: Principles of Microeconomics Chapter 12  Behind the Supply Curve  Inputs and Costs Fall 2010 Herriges (ISU) Ch. 12 Behind the Supply Curve Fall 2010 1 / 30 Outline 1 The Production Function
More informationChapter 22 The Cost of Production Extra Multiple Choice Questions for Review
Chapter 22 The Cost of Production Extra Multiple Choice Questions for Review 1. Implicit costs are: A) equal to total fixed costs. B) comprised entirely of variable costs. C) "payments" for selfemployed
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Firms that survive in the long run are usually those that A) remain small. B) strive for the largest
More informationCosumnes River College Principles of Microeconomics Problem Set 6 Due Tuesday, March 24, 2015
Name: Solutions Cosumnes River College Principles of Microeconomics Problem Set 6 Due Tuesday, March 24, 2015 Spring 2015 Prof. Dowell Instructions: Write the answers clearly and concisely on these sheets
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Practice for Perfect Competition Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is a defining characteristic of a
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.
Principles of Microeconomics, Quiz #5 Fall 2007 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) Perfect competition
More informationCEVAPLAR. Solution: a. Given the competitive nature of the industry, Conigan should equate P to MC.
1 I S L 8 0 5 U Y G U L A M A L I İ K T İ S A T _ U Y G U L A M A ( 4 ) _ 9 K a s ı m 2 0 1 2 CEVAPLAR 1. Conigan Box Company produces cardboard boxes that are sold in bundles of 1000 boxes. The market
More informationLearning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:
Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive
More informationTechnology, Production, and Costs
Chapter 10 Technology, Production, and Costs 10.1 Technology: An Economic Definition 10.1 LEARNING OBJECTIVE Learning Objective 1 Define technology and give examples of technological change. A firm s technology
More informationChapter 5 The Production Process and Costs
Managerial Economics & Business Strategy Chapter 5 The Production Process and Costs McGrawHill/Irwin Copyright 2010 by the McGrawHill Companies, Inc. All rights reserved. Overview I. Production Analysis
More informationPreTest Chapter 20 ed17
PreTest Chapter 20 ed17 Multiple Choice Questions 1. In the above diagram it is assumed that: A. some costs are fixed and other costs are variable. B. all costs are variable. C. the law of diminishing
More informationCost OVERVIEW. WSG6 7/7/03 4:36 PM Page 79. Copyright 2003 by Academic Press. All rights of reproduction in any form reserved.
WSG6 7/7/03 4:36 PM Page 79 6 Cost OVERVIEW The previous chapter reviewed the theoretical implications of the technological process whereby factors of production are efficiently transformed into goods
More informationSHORTRUN PRODUCTION
TRUE OR FALSE STATEMENTS SHORTRUN PRODUCTION 1. According to the law of diminishing returns, additional units of the labour input increase the total output at a constantly slower rate. 2. In the shortrun
More informationCOST THEORY. I What costs matter? A Opportunity Costs
COST THEORY Cost theory is related to production theory, they are often used together. However, the question is how much to produce, as opposed to which inputs to use. That is, assume that we use production
More informationChapter. Perfect Competition CHAPTER IN PERSPECTIVE
Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.
More informationN. Gregory Mankiw Principles of Economics. Chapter 13. THE COSTS OF PRODUCTION
N. Gregory Mankiw Principles of Economics Chapter 13. THE COSTS OF PRODUCTION Solutions to Problems and Applications 1. a. opportunity cost; b. average total cost; c. fixed cost; d. variable cost; e. total
More informationPrice Theory Lecture 4: Production & Cost
Price Theory Lecture 4: Production & Cost Now that we ve explained the demand side of the market, our goal is to develop a greater understanding of the supply side. Ultimately, we want to use a theory
More informationUnit 2.3  Theory of the Firm Unit Overview
Unit 2.3.1  Introduction to Market Structures and Cost Theory Intro to Market Structures Pure competition Monopolistic competition Oligopoly Monopoly Cost theory Types of costs: fixed costs, variable
More informationMERSİN UNIVERSITY FACULTY OF ECONOMICS AND ADMINISTRATIVE SCİENCES DEPARTMENT OF ECONOMICS MICROECONOMICS MIDTERM EXAM DATE 18.11.
MERSİN UNIVERSITY FACULTY OF ECONOMICS AND ADMINISTRATIVE SCİENCES DEPARTMENT OF ECONOMICS MICROECONOMICS MIDTERM EXAM DATE 18.11.2011 TİIE 12:30 STUDENT NAME AND NUMBER MULTIPLE CHOICE. Choose the one
More informationChapter 7: The Costs of Production QUESTIONS FOR REVIEW
HW #7: Solutions QUESTIONS FOR REVIEW 8. Assume the marginal cost of production is greater than the average variable cost. Can you determine whether the average variable cost is increasing or decreasing?
More informationThe Cost of Production
The Cost of Production 1. Opportunity Costs 2. Economic Costs versus Accounting Costs 3. All Sorts of Different Kinds of Costs 4. Cost in the Short Run 5. Cost in the Long Run 6. Cost Minimization 7. The
More informationQ = ak L + bk L. 2. The properties of a shortrun cubic production function ( Q = AL + BL )
Learning Objectives After reading Chapter 10 and working the problems for Chapter 10 in the textbook and in this Student Workbook, you should be able to: Specify and estimate a shortrun production function
More informationMicroeconomics Topic 6: Be able to explain and calculate average and marginal cost to make production decisions.
Microeconomics Topic 6: Be able to explain and calculate average and marginal cost to make production decisions. Reference: Gregory Mankiw s Principles of Microeconomics, 2 nd edition, Chapter 13. LongRun
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 11 Perfect Competition  Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a
More informationChapter 12 Production and Cost
Chapter 12 Production and Cost 12.1 Economic Cost and Profit 1) The primary goal of a business firm is to A) promote fairness. B) make a quality product. C) promote workforce job satisfaction. D) maximize
More informationPreTest Chapter 25 ed17
PreTest Chapter 25 ed17 Multiple Choice Questions 1. Refer to the above graph. An increase in the quantity of labor demanded (as distinct from an increase in demand) is shown by the: A. shift from labor
More informationAn increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers.
1. Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of paper used in publishing texts. b. A fall in the price of equivalent used text books. c.
More informationEconomics 10: Problem Set 3 (With Answers)
Economics 1: Problem Set 3 (With Answers) 1. Assume you own a bookstore that has the following cost and revenue information for last year:  gross revenue from sales $1,  cost of inventory 4,  wages
More informationPART A: For each worker, determine that worker's marginal product of labor.
ECON 3310 Homework #4  Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART
More informationECON 103, 20082 ANSWERS TO HOME WORK ASSIGNMENTS
ECON 103, 20082 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 9 Chapter 6 WRITE [4] Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5,000 for his
More information11 PERFECT COMPETITION. Chapter. Competition
Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat
More informationCHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY
CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY EXERCISES 3. A monopolist firm faces a demand with constant elasticity of .0. It has a constant marginal cost of $0 per unit and sets a price to maximize
More informationLongRun Average Cost. Econ 410: Micro Theory. LongRun Average Cost. LongRun Average Cost. Economies of Scale & Scope Minimizing Cost Mathematically
Slide 1 Slide 3 Econ 410: Micro Theory & Scope Minimizing Cost Mathematically Friday, November 9 th, 2007 Cost But, at some point, average costs for a firm will tend to increase. Why? Factory space and
More informationLecture 2. Marginal Functions, Average Functions, Elasticity, the Marginal Principle, and Constrained Optimization
Lecture 2. Marginal Functions, Average Functions, Elasticity, the Marginal Principle, and Constrained Optimization 2.1. Introduction Suppose that an economic relationship can be described by a realvalued
More informationCE2451 Engineering Economics & Cost Analysis. Objectives of this course
CE2451 Engineering Economics & Cost Analysis Dr. M. Selvakumar Associate Professor Department of Civil Engineering Sri Venkateswara College of Engineering Objectives of this course The main objective of
More informationReview of Production and Cost Concepts
Sloan School of Management 15.010/15.011 Massachusetts Institute of Technology RECITATION NOTES #3 Review of Production and Cost Concepts Thursday  September 23, 2004 OUTLINE OF TODAY S RECITATION 1.
More informationc. Given your answer in part (b), what do you anticipate will happen in this market in the longrun?
Perfect Competition Questions Question 1 Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MBA 640, Survey of Microeconomics, Quiz #4 Fall 2006 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the short run, A) there are no variable
More informationChapter 12. The Costs of Produc4on
Chapter 12 The Costs of Produc4on Copyright 214 McGrawHill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGrawHill Education. What will you learn
More informationMarket Structure: Perfect Competition and Monopoly
WSG8 7/7/03 4:34 PM Page 113 8 Market Structure: Perfect Competition and Monopoly OVERVIEW One of the most important decisions made by a manager is how to price the firm s product. If the firm is a profit
More informationa. What is the total revenue Joe can earn in a year? b. What are the explicit costs Joe incurs while producing ten boats?
Chapter 13 1. Joe runs a small boat factory. He can make ten boats per year and sell them for 25,000 each. It costs Joe 150,000 for the raw materials (fibreglass, wood, paint, and so on) to build the ten
More informationProfit and Revenue Maximization
WSG7 7/7/03 4:36 PM Page 95 7 Profit and Revenue Maximization OVERVIEW The purpose of this chapter is to develop a general framework for finding optimal solutions to managerial decisionmaking problems.
More informationAP Microeconomics Chapter 12 Outline
I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.
More information14.01 Principles of Microeconomics, Fall 2007 ChiaHui Chen October 15, 2007. Lecture 13. Cost Function
ShortRun Cost Function. Principles of Microeconomics, Fall ChiaHui Chen October, ecture Cost Functions Outline. Chap : ShortRun Cost Function. Chap : ongrun Cost Function Cost Function et w be the
More informationEXAM TWO REVIEW: A. Explicit Cost vs. Implicit Cost and Accounting Costs vs. Economic Costs:
EXAM TWO REVIEW: A. Explicit Cost vs. Implicit Cost and Accounting Costs vs. Economic Costs: Economic Cost: the monetary value of all inputs used in a particular activity or enterprise over a given period.
More informationCOST & BREAKEVEN ANALYSIS
COST & BREAKEVEN ANALYSIS http://www.tutorialspoint.com/managerial_economics/cost_and_breakeven_analysis.htm Copyright tutorialspoint.com In managerial economics another area which is of great importance
More informationChapter 6 Competitive Markets
Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a
More informationPractice Questions Week 8 Day 1
Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants
More informationProduction Function in the LongRun. Business Economics Theory of the Firm II Production and Cost in the Long Run. Description of Technology
Business Economics Theory of the Firm II Production and Cost in the ong Run Two or more variable input factors Thomas & Maurice, Chapter 9 Herbert Stocker herbert.stocker@uibk.ac.at Institute of International
More informationNAME: INTERMEDIATE MICROECONOMIC THEORY SPRING 2008 ECONOMICS 300/010 & 011 Midterm II April 30, 2008
NAME: INTERMEDIATE MICROECONOMIC THEORY SPRING 2008 ECONOMICS 300/010 & 011 Section I: Multiple Choice (4 points each) Identify the choice that best completes the statement or answers the question. 1.
More informationCost of Production : An Example
University of California, Berkeley Spring 008 ECON 00A Section 0, Cost of Production : An Example What you should get out of this example: Understand the technical derivation of optimal inputs in Cost
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.
Principles of Microeconomics Fall 2007, Quiz #6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) A monopoly is
More informationCHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY
CHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY TEACHING NOTES This chapter begins by explaining what we mean by a competitive market and why it makes sense to assume that firms try to maximize profit.
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The fourfirm concentration ratio equals the percentage of the value of accounted for by the four
More informationOVERVIEW. 5. The marginal cost is hook shaped. The shape is due to the law of diminishing returns.
9 COST OVERVIEW 1. Total fixed cost is the cost which does not vary with output. Total variable cost changes as output changes. Total cost is the sum of total fixed cost and total variable cost. 2. Explicit
More informationChapter 8. Competitive Firms and Markets
Chapter 8. Competitive Firms and Markets We have learned the production function and cost function, the question now is: how much to produce such that firm can maximize his profit? To solve this question,
More informationECON 103, 20082 ANSWERS TO HOME WORK ASSIGNMENTS
ECON 103, 20082 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot
More information21 : Theory of Cost 1
21 : Theory of Cost 1 Recap from last Session Production cost Types of Cost: Accounting/Economic Analysis Cost Output Relationship Short run cost Analysis Session Outline The LongRun CostOutput Relations
More informationProductioin OVERVIEW. WSG5 7/7/03 4:35 PM Page 63. Copyright 2003 by Academic Press. All rights of reproduction in any form reserved.
WSG5 7/7/03 4:35 PM Page 63 5 Productioin OVERVIEW This chapter reviews the general problem of transforming productive resources in goods and services for sale in the market. A production function is the
More informationPreTest Chapter 18 ed17
PreTest Chapter 18 ed17 Multiple Choice Questions 1. (Consider This) Elastic demand is analogous to a and inelastic demand to a. A. normal wrench; socket wrench B. Ace bandage; firm rubber tiedown C.
More information1. Project costs that are borne by persons or entities not directly involved in the project activity are known as costs.
CHAPTER 7 PRODUCTION COSTS Microeconomics in Context (Goodwin, et al.), 1 st Edition (Study Guide 2008) Chapter Overview Chapter 7 begins a twochapter sequence describing the activity of production. The
More information, to its new position, ATC 2
S171S184_Krugman2e_PS_Ch12.qxp 9/16/08 9:22 PM Page S171 Behind the Supply Curve: Inputs and Costs chapter: 12 1. Changes in the prices of key commodities can have a significant impact on a company s
More informationCHAPTER 8 COSTS OF PRODUCTION
CHAPTER 8 COSTS OF PRODUCTION Chapter in a Nutshell This chapter gives an indepth look at the costs of production for firms, both in the short run and in the long run. Although production techniques may
More informationD) Marginal revenue is the rate at which total revenue changes with respect to changes in output.
Ch. 9 1. Which of the following is not an assumption of a perfectly competitive market? A) Fragmented industry B) Differentiated product C) Perfect information D) Equal access to resources 2. Which of
More informationMonopoly and Monopsony Labor Market Behavior
Monopoly and Monopsony abor Market Behavior 1 Introduction For the purposes of this handout, let s assume that firms operate in just two markets: the market for their product where they are a seller) and
More informationChapter 4: Elasticity
Chapter : Elasticity Elasticity of eman: It measures the responsiveness of quantity emane (or eman) with respect to changes in its own price (or income or the price of some other commoity). Why is Elasticity
More informationTable of Contents MICRO ECONOMICS
economicsentrance.weebly.com Basic Exercises Micro Economics AKG 09 Table of Contents MICRO ECONOMICS Budget Constraint... 4 Practice problems... 4 Answers... 4 Supply and Demand... 7 Practice Problems...
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Multiple choice review questions for Midterm 2 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A consumption point inside the budget line A) is
More informationPractice Multiple Choice Questions Answers are bolded. Explanations to come soon!!
Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! For more, please visit: http://courses.missouristate.edu/reedolsen/courses/eco165/qeq.htm Market Equilibrium and Applications
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that
More informationProduction and Cost Analysis
Production and Cost Analysis The entire production process begins with the supply of factors of production or inputs used towards the production of a final good we all consume in the final good market.
More informationN. Gregory Mankiw Principles of Economics. Chapter 14. FIRMS IN COMPETITIVE MARKETS
N. Gregory Mankiw Principles of Economics Chapter 14. FIRMS IN COMPETITIVE MARKETS Solutions to Problems and Applications 1. A competitive market is one in which: (1) there are many buyers and many sellers
More informationANSWERS TO ENDOFCHAPTER QUESTIONS
ANSWERS TO ENDOFCHAPTER QUESTIONS 231 Briefly indicate the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications
More informationBreakeven Analysis. Thus, if we assume that price and AVC are constant, (1) can be rewritten as follows TFC AVC
Breakeven Analysis An enterprise, whether or not a profit maximizer, often finds it useful to know what price (or output level) must be for total revenue just equal total cost. This can be done with a
More informationMicroeconomics Instructor Miller Practice Problems Labor Market
Microeconomics Instructor Miller Practice Problems Labor Market 1. What is a factor market? A) It is a market where financial instruments are traded. B) It is a market where stocks and bonds are traded.
More informationReview 3. Table 142. The following table presents cost and revenue information for Soper s Port Vineyard.
Review 3 Chapters 10, 11, 12, 13, 14 are included in Midterm 3. There will be 4045 questions. Most of the questions will be definitional, make sure you read the text carefully. Table 142 The following
More informationMICROECONOMICS AND POLICY ANALYSIS  U8213 Professor Rajeev H. Dehejia Class Notes  Spring 2001
MICROECONOMICS AND POLICY ANALYSIS  U8213 Professor Rajeev H. Dehejia Class Notes  Spring 2001 General Equilibrium and welfare with production Wednesday, January 24 th and Monday, January 29 th Reading:
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Test 2 Review Econ 201, V. Tremblay MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Barbara left a $25,000 job as an architect to run a catering
More informationConsumers face constraints on their choices because they have limited incomes.
Consumer Choice: the Demand Side of the Market Consumers face constraints on their choices because they have limited incomes. Wealthy and poor individuals have limited budgets relative to their desires.
More informationEconomics 203: Intermediate Microeconomics I Lab Exercise #11. Buy Building Lease F1 = 500 F1 = 750 Firm 2 F2 = 500 F2 = 400
Page 1 March 19, 2012 Section 1: Test Your Understanding Economics 203: Intermediate Microeconomics I Lab Exercise #11 The following payoff matrix represents the longrun payoffs for two duopolists faced
More informationCHAPTER 4 Labor Demand Elasticities
CHAPTER 4 Labor Demand Elasticities In addition to the multiple choice problems listed below, complete the following end of chapter questions: Review questions 1,3, 4, 6 and 7. Problems 1, 2, 3 and 5.
More informationEmployment and Pricing of Inputs
Employment and Pricing of Inputs Previously we studied the factors that determine the output and price of goods. In chapters 16 and 17, we will focus on the factors that determine the employment level
More informationAP Microeconomics Review
AP Microeconomics Review 1. Firm in Perfect Competition (LongRun Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with FairReturn
More informationChapter 9: Perfect Competition
Chapter 9: Perfect Competition Perfect Competition Law of One Price ShortRun Equilibrium LongRun Equilibrium Maximize Profit Market Equilibrium Constant Cost Industry Increasing Cost Industry Decreasing
More information8. Average product reaches a maximum when labor equals A) 100 B) 200 C) 300 D) 400
Ch. 6 1. The production function represents A) the quantity of inputs necessary to produce a given level of output. B) the various recipes for producing a given level of output. C) the minimum amounts
More informationUse the following to answer question 9: Exhibit: Keynesian Cross
1. Leading economic indicators are: A) the most popular economic statistics. B) data that are used to construct the consumer price index and the unemployment rate. C) variables that tend to fluctuate in
More informationPreTest Chapter 21 ed17
PreTest Chapter 21 ed17 Multiple Choice Questions 1. Which of the following is not a basic characteristic of pure competition? A. considerable nonprice competition B. no barriers to the entry or exodus
More informationECON 3312 Macroeconomics Exam 3 Fall 2014. Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
ECON 3312 Macroeconomics Exam 3 Fall 2014 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Everything else held constant, an increase in net
More informationINTRODUCTORY MICROECONOMICS
INTRODUCTORY MICROECONOMICS UNITI PRODUCTION POSSIBILITIES CURVE The production possibilities (PP) curve is a graphical medium of highlighting the central problem of 'what to produce'. To decide what
More informationEcon 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.
, Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 201 Final Exam 1. For a profitmaximizing monopolist, a. MR
More informationEcon 102 Aggregate Supply and Demand
Econ 102 ggregate Supply and Demand 1. s on previous homework assignments, turn in a news article together with your summary and explanation of why it is relevant to this week s topic, ggregate Supply
More informationLABOR UNIONS. Appendix. Key Concepts
Appendix LABOR UNION Key Concepts Market Power in the Labor Market A labor union is an organized group of workers that aims to increase wages and influence other job conditions. Craft union a group of
More informationChapter 7 Monopoly, Oligopoly and Strategy
Chapter 7 Monopoly, Oligopoly and Strategy After reading Chapter 7, MONOPOLY, OLIGOPOLY AND STRATEGY, you should be able to: Define the characteristics of Monopoly and Oligopoly, and explain why the are
More informationGETTING STARTED IN THE MEAT GOAT BUSINESS
GETTING STARTED IN THE MEAT GOAT BUSINESS Bulletin I, Vol. II An Enterprise Budget For Meat Goat Producer s: Its Characteristics and Importance By Gilbert Queeley and Angela McKenzieJakes Extension Animal
More informationChapter 6 MULTIPLECHOICE QUESTIONS
Chapter 6 MULTIPLECHOICE QUETION 1. Which one of the following is generally considered a characteristic of a perfectly competitive labor market? a. A few workers of varying skills and capabilities b.
More informationCHAPTER 6 MARKET STRUCTURE
CHAPTER 6 MARKET STRUCTURE CHAPTER SUMMARY This chapter presents an economic analysis of market structure. It starts with perfect competition as a benchmark. Potential barriers to entry, that might limit
More informationMONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL*
Chapter 11 MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL* The Demand for Topic: Influences on Holding 1) The quantity of money that people choose to hold depends on which of the following? I. The price
More informationBADM 527, Fall 2013. Midterm Exam 2. Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME
BADM 527, Fall 2013 Name: Midterm Exam 2 November 7, 2013 Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME 1. According to classical theory, national income (Real
More informationChapter 011 Project Analysis and Evaluation
Multiple Choice Questions 1. Forecasting risk is defined as the: a. possibility that some proposed projects will be rejected. b. process of estimating future cash flows relative to a project. C. possibility
More informationFinal Exam (Version 1) Answers
Final Exam Economics 101 Fall 2003 Wallace Final Exam (Version 1) Answers 1. The marginal revenue product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal
More information