A firm has a fixed production cost of $1,000 and a constant marginal cost of production of $700 per unit produced. What is the firm's total cost function? O A. TC = 1,000 + (700q) O B. TC = 1,000 + (700q). OC. TC = 700q. O D. TC = 1,000. The firm's average total cost (ATC) of production is A. ATC = 1,000 + (700q). В. ATC = 1,000 + (700q) OC. ATC = 1,000 D. ATC = 700q. E. ATC = 700. %3! If the firm wanted to minimize the average total cost, would it choose to be very large or very small? Explain. O A. very small because the average total cost of production rises with output. B.- very large because the average variable cost of production falls with output. C. very small because the average fixed cost of production rises with output. D. very small because the total cost of production rises with output. E. very large because the average total cost of production falls with output.

A firm has a fixed production cost of $1,000 and a constant marginal cost of production of $700 per unit produced. What is the firm's total cost function? O A. TC = 1,000 + (700q) O B. TC = 1,000 + (700q). OC. TC = 700q. O D. TC = 1,000. The firm's average total cost (ATC) of production is A. ATC = 1,000 + (700q). В. ATC = 1,000 + (700q) OC. ATC = 1,000 D. ATC = 700q. E. ATC = 700. %3! If the firm wanted to minimize the average total cost, would it choose to be very large or very small? Explain. O A. very small because the average total cost of production rises with output. B.- very large because the average variable cost of production falls with output. C. very small because the average fixed cost of production rises with output. D. very small because the total cost of production rises with output. E. very large because the average total cost of production falls with output.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Production And Cost In The Firm

Section: Chapter Questions

Problem 3.7P

See similar textbooks

Similar questions

2.4 Q7 In the theory of the firm, economist consider the total cost to be a function of the output level Q: C=f(Q). (a) According to the definiton of a function, should each cost figure be associated with a unique level of output? (b) should each leyel of output determine a unique cost figure?
Which statement must be false? a) When a firm has increasing returns to scale in production, its marginal cost curve will be downward sloping. b) When a firm has constant returns to scale, its total cost curve will be an upward sloping line. c) When a firm has diminishing returns to scale in production, its average cost curve will be upward sloping. d) Every firm faces eventually diminishing returns to scale, where its average cost curve reaches its minimum.
Why does the marginal product curve have an inverted “U” shape?2. Using diagrams, explain the relationship between the marginal product curve andmarginal cost curve? 3. What are the three stages of production? At which stage of production should a profit-maximising firm produce? 4. Fill in the appropriate numbers in the blank spaces, given the following information:output Total fixedcost (RM) Totalvariable cost(RM) Averagefixedcost(RM)Averagetotal cost(RM)Marginalcost(RM) 0 100 01 100 202 100 503 100 604 100 655 100 70 5. Complete the table below: Output TotalCost(RM) Totalvariablecost(RM) Totalfixedcost(RM)Averagefixedcost(RM)Averagetotalcost(RM)Marginalcost (RM) 0 505 16010 20020 25036 33058 40072 48088 580106 700130 820150 980
a) If the price of output is GHS 10 per unit, how many units of labour should the firm employ to maximize profit b) At this quantity of labour (from part (a)), what quantity of output will the firm produce and how much profit will the firm make? c) Derive the firm’s short-run total cost function,firm’s marginal and average cost functions. e) What is the total cost of producing 100 units of output? For the rest of this question, assume that the firm is now free to choose any level of capital and labour. f) How many units of capital and labour will it choose to minimize the cost of producing 100 units of output?
A. Derive the total cost function for the firm B. Suppose the cost of producing 10 units of output is Rs . 150. If the price of capital is Rs . 2 per unit at that level , calculate the price of labour for the same. C. Output expansion path shows how the optimal input usage changes with the change in output , if input prices do not change . Draw a labelled diagram showing iso - cost line and isoquant for Q = 10. Now , show the locus of output expansion path for the firm . Also find an equation for the output expansion path .
A firm uses labor and machines to produce outputaccording to the production function f(L, M) = 4L^1/2M^1/2, where L is the number of units of laborused and M is the number of machines. The cost of labor is $40 per unit and the cost of using amachine is $10.1. Draw an isocost line for this firm, showing combinations of machines and labor that cost $400and another isocost line showing combinations that cost $200.2. Suppose that the firm wants to produce its output in the cheapest possible way. Find thenumber of machines it would use per worker. (Hint: The firm will produce at a point wherethe slope of the production isoquant equals the slope of the isocost line.)
In the short run production function O a. All inputs are variable O b. All inputs are fixed O C. There are fixed and variable inputs Od. Technology alone is variable
Suppose the production function for high quality brandy is given by : Q = √KLWhere q is the output of brandy per week and L is labor hours per week ., in the short run K is fixed at 100, so the short run production function is Q = 10√La. If the capital rents for 10$ and the wage are 5$per hour ., write the short run total cost function. b. How much will the firm produce at a price of 20$ per bottles of brandy ?c. How many labor hours will be hired per week?
QUESTION 1a. Is it possible to have diminishing returns to a single factor of production and constant returnsto scale at the same time? Discuss.b. Isoquants can be convex, linear, or L-shaped. What does each of these shapes tell you aboutthe nature of the production function? What does each of these shapes tell you about theMRTS?QUESTION 2a. A firm faces the following average revenue (demand) curve:P = 120 − 0.02Qwhere Q is weekly production and P is price, measured in cents per unit. The firm’s costfunction is given by C = 60Q + 25,000. Assume that the firm maximizes profits.i. What is the level of production, price, and total profit per week?ii. If the government decides to levy a tax of 14 cents per unit on this product, what will be thenew level of production, price, and profit?b. The United States currently imports all of its coffee. The annual demand for coffee by U.S.consumers is given by the demand curve Q = 250 – 10P, where Q is quantity (in millions ofpounds) and P is the…
) A company manufacturing laundry sinks has fixed costs of $100 per day but has totalcosts of $2,500 per day when producing 15 sinks. The company has a daily demand functionof q = 360 − p, where q is the number if laundry sinks demanded and p is te price ofa laundry sink. Find a function for the average cost of this company. (c) If production increases continuously, what is likely to be the average cost per sink? (d) How many laundry sinks will the company need to produce in order to maximise it′s profits? (e) What is the maximum profit?
Which of the following is the extra, or additional, cost of producing one more unit of output? Select one: a. Marginal cost Ob. Average fixed cost Oc. Total variable cost Od. Average variable cost
6. Which of the following are true (check all that apply) Note: IRTS=increasing returns to scale, CRTS=constant returns to scale, DRTS=decreasing returns to scale a. if the production function exhibits IRTS, then the cost function will exhibit economies of scale b. if the production function exhibits IRTS, then the cost function will exhibit diseconomies economies of scale c. if the cost function exhibits diseconomies of scale, then the producing function exhibits DRTS d. if the production function exhibits CRTS, then the cost function will exhibit constant economies of scale e. if the production function exhibits DRTS then the cost function will exhibit diseconomies of scale