# Economic: Total Cost

1057 Words Jul 8th, 2012 5 Pages
Review Question #3
Principles of Microeconomics
Spring 2010

1. Your cousin Vinnie owns a painting company with fixed costs of \$200 and the schedule for variable costs as below. What is the efficient scale of the painting company? Quantity of Houses Painted per Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | Variable Costs | \$10 | \$20 | \$40 | \$80 | \$160 | \$320 | \$640 |

2. Your aunt is thinking about opening a hardware store. She estimates that it would cost \$500,000 per year to rent the location and buy the stock. In addition, she would have to quit her \$50,000 per year job as an accountant. If your aunt thought she could sell \$510,000 worth of merchandise in a year, should she open the store?

3. What you give up for taking
If you were Johnn’s agent, what recording fee would you advise Johnny to demand from the record company?

18. Explain why a monopolist will never produce a quantity at which the demand curve is inelastic.

19. You live in a town with 300 adults and 200 children, and you are thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of \$2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customer: Price | \$10 | 9 | 8 | 7 | 6 | 5 | 4 | 3 | 2 | 1 | 0 | Adults | 0 | 100 | 200 | 300 | 300 | 300 | 300 | 300 | 300 | 300 | 300 | Children | 0 | 0 | 0 | 0 | 0 | 100 | 200 | 200 | 200 | 200 | 200 |
To maximize profit, what price would you charge for an adult ticket and for a child’s ticket? What if price discrimination is not allowed? Calculate the lost incurred by the policy of not allowing price discrimination.

20. A ______ firm faces downward-sloping demand curve. Fill out the blank and explain the statement.

21. A ______ firm has marginal revenue less than price. Fill out the blank and explain the statement.

22. A ______ firm faces the entry of new firms selling similar products. Fill out the blank and explain the statement.

23. A ______ firm earns economic profit in the long run. Fill out the blank and explain the statement.

24. A ______ firm equates marginal revenue and marginal cost. Fill out the blank