International Edition---microeconomics, 9th Edition
9th Edition
ISBN: 9780134674551
Author: Robert Pindyck And Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 7, Problem 15E
To determine
Identify the short run average cost (SAC) and the long run average cost (LAC).
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Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true.Â
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The optimal scale of plant is the scale of plant that maximizes average cost.
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Answer correctly and explain within 30mins will give you positive feedback.
Consider the following types of firms. For each one, the long-run average cost curve eventually exhibits diseconomies of scale. For which firms would you expect diseconomies of scale to set in at relatively low levels of output? Why?
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An economist estimated that the cost function of a single-product firm is:C(Q) = 70 + 30Q + 20Q2 + 10Q3.Based on this information, determine the following:a. The fixed cost of producing 10 units of output.$ b. The variable cost of producing 10 units of output.$ c. The total cost of producing 10 units of output.$ d. The average fixed cost of producing 10 units of output.$ e. The average variable cost of producing 10 units of output.$ f. The average total cost of producing 10 units of output.$ g. The marginal cost when Q = 10.$
Chapter 7 Solutions
International Edition---microeconomics, 9th Edition
Ch. 7.A - Prob. 1ECh. 7.A - Prob. 2ECh. 7.A - Prob. 3ECh. 7.A - Prob. 4ECh. 7.A - Prob. 5ECh. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQ
Ch. 7 - Prob. 6RQCh. 7 - Prob. 7RQCh. 7 - Prob. 8RQCh. 7 - Prob. 9RQCh. 7 - Prob. 10RQCh. 7 - Prob. 11RQCh. 7 - Prob. 12RQCh. 7 - Prob. 13RQCh. 7 - Prob. 14RQCh. 7 - Prob. 1ECh. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Prob. 8ECh. 7 - Prob. 9ECh. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Prob. 14ECh. 7 - Prob. 15ECh. 7 - Prob. 16E
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- An economist estimated that the cost function of a single-product firm is: Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â C(Q) = 100 + 20Q + 15Q2 + 10Q3 Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â [NOTE Ă MC(Q) = 20+30Q+30Q2] Â Â Â Â Â Â Â Â Â Â Â Â Based on this information, determine: The fixed cost of producing 10 units of output The variable cost of producing 10 units of output The total cost of producing 10 units of output The average fixed cost of producing 10 units of output The average variable cost of producing 10 units of output The average total cost of producing 10 units of output The marginal cost when Q = 10arrow_forwardMonth (m): Â Â Â Â Â Â Â Â Â 4Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Day (d): Â 1 Use the two numbers above, m and d, to complete the cost function for a perfectly competitive firm: Cost (q) = m q2 + d = Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (30) For a cost function like yours, Marginal Cost (MC) = 2 m q . Specifically, what are the following for the cost function you wrote out above? Fixed Cost = Average Total Cost = Cost (q)/q = Variable Cost = Average Fixed Cost = FC/q = Marginal Cost = 2 m q = Average Variable Cost = VC/q = (15) Fill in the table with your values from your cost function. q Total Cost AVC AFC ATC MC 0 0 0 -- -- -- 1 Â Â Â Â Â 2 Â Â Â Â Â 3 Â Â Â Â Â 4 Â Â Â Â Â 5 Â Â Â Â Â 6arrow_forwardAn economist estimated that the cost function of a single-product firm is C(Q) = 100 + 20Q + 15Q2 + 10Q3 Based on this information, determine a. The fixed cost of producing 10 units of output.b. The variable cost of producing 10 units of output. c. The total cost of producing 10 units of output. d. The average fixed cost of producing 10 units of output. e. The average variable cost of producing 10 units of output. f. The average total cost of producing 10 units of output. g. The marginal cost when Q = 10.arrow_forward
- An isocost line is defined by a. Combinations of inputs required to earn a constant level of profit b. Combinations of inputs required to produce the same quantity of output c. Combinations of inputs required to incur constant cost d. Combinations of labour required to maintain a constant quantity of capitalarrow_forwardSuppose that you are interested in comparing the costs of producing inpatient care services at XYZ Hospital with those at ABC Hospital. Further suppose that the two hospitals annually admit about 24,000 (XYZ) and 32,000 (ABC) patients at average short-run total costs per admission of roughly $11,000 (ABC) and $12,000 (XYZ). Using short run cost theory, identify four factors that might explain why ABC Hospital has higher average short run costs of production than XYZ Hospital.arrow_forwardIn a furniture market, if a furniture company is analyzing the short run total costs, one of the following business practices would be beneficial. Which one? divide the variable costs of production by the quantity of output divide the total costs of production by the quantity of output divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be. divide total costs into two categories: variable costs that can't be changed in the short run and fixed costs that can bearrow_forward
- A research study published in Social Science Medicine, “Production Functions for General Hospitals,” estimated the following general hospital production function in the Netherlands: Q = 5*Staff.34*Beds.64*Drugs.04*Specialists.02, where Q is a measure used by the authors for patient care. Suppose a hospital currently utilizes the following inputs: Staff =20, Beds = 120, Drugs = 60, Specialists =10. Use a spreadsheet to find the following or otherwise. If the hospital increases its specialists by one (1), that is, employs an 11th specialist, the increase in Q (marginal product) will be:arrow_forwardConsider the following table of long-run total cost for four different firms:  Which firms have diseconomies of scale over the entire range of output? a. Firm 1b. Firm 2c. Firm 3d. Firm 4e. Firm 2 and 4arrow_forwardSuppose the long-run production function for a competitive firm is f(x1,x2)= min {3x1,2x2}. The cost per unit of the first input is w1 and the cost of the second input is w2. A: Find the cheapest input bundle, i.e. amount of labor and capital, that yields the given output level of y. B: Write down the formula and draw the graph of the firm’s total cost function as a function of y, using the conditional input demand functions. What is the relationship between the returns to production scale and the behavior of the total costs? C: Write down the formulas and draw the graphs of the average cost and marginal cost functions, as functions of y.arrow_forward
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