Microeconomics
2nd Edition
ISBN: 9780073375854
Author: B. Douglas Bernheim, Michael Whinston
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 3, Problem 5CP
To determine
Marginal cost and marginal benefit.
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If marginal cost is greater than average total cost, then average total cost must be increasing.
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- You have been invited by friends to fly to Germany for October fest next year. For international travel, you apply for a passport that costs $97 and is valid for 10 years. After you receive your passport, your travel companions decide to cancel the trip because of “insufficient funds.” You decide to also cancel your travel plans because traveling alone is no fun. Is your passport expense a sunk cost or an opportunity cost? Explain your answer.arrow_forwardThe weekly cost C of producing x units in a manufacturing process is given by C(x) = 60x + 2250. The number of units x produced in t hours is given by x(t) = 50t. (a) Find and interpret (C ∘ x)(t). (C ∘ x)(t) = (C∘x)(t) represents the cost of production as a function of time. (C∘x)(t) represents the production as a function of cost. (b) Find the cost of the units produced in 4 hours.$ (c) Find the time that must elapse in order for the cost to increase to $15,000. hrarrow_forwardConsider a simple three-step manufacturing process as illustrated in the figure given. Assuming the demand is 1,000 units, what is the input needed to meet the demand? Suppose the cost of loss is $5 in process 1, $10 in process 2, and $US 15 in the process 3. The defect rates are 3%, 5% and 7%, respectively. Calculate the total cost of the loss in the system provided and in the system where the scrap rates are reversed. which system would be preferable?arrow_forward
- question 8 For each of the following situations, Find the Total Cost function, TC(q) Identify the optimal input mix, L* and K* for the given q. A) q = 2*MIN(L,5K); w = 8, r = 10; i) (5 points) TC(q) = __________________ ii) (4 points) q = 20 L* = _________________ K* = _________________arrow_forwardFor the cost function C(Q) = 75 + 4Q + 2Q2, the marginal cost of producing 5 units of output is:arrow_forwardAs a production process requires labor L and capital K, q = F (L, K). The wage for a labor is $500, the cost for one capital is $250. If the firm has a budget of $5000 to produce, what is the firm's optimum outputarrow_forward
- For the cost function C(Q) = 200+3Q2+4Q3, what is the average fixed cost of producing 10 units of output? 18.31 42.12 212.61 20arrow_forwardTo be efficient, outputs should be produced that minimize total cost. True or falsearrow_forwardImagine you own your own business. Based on what you learned from the simulation, what factors would determine your entry and exit into a market? Applying the concept of marginal costs, how would you, as a business owner, decide how much to produce? How does the impact of fixed costs change production decisions in the short run and in the long run? Refer to the average total-cost (ATC) model included in the textbook to demonstrate.arrow_forward
- The total cost of producing the first q items is given by the formula C(q) = -2q^3 + 60q^2 + 1000 (For example, C(10) gives the cost of the first 10 items.) a.) Find the average cost of producing items 6 through 10 b.) Find the marginal cost when q = 8arrow_forwardConsider the following quadratic (potential cost) functionarrow_forwardState the relationship between average variable cost (AVC), and marginal cost (MC) when AVC is decreasing, is AVC is above (greater), equal, or less (below) than MC? ________ choose one AVC is minimum, is AVC is above, equal or less than MC? __________ choose one AVC is increasing, is AVC is above, equal, or less than MC? _________ choose onearrow_forward
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