Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 7, Problem 1.6P
To determine
The profit of Apple.
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Briefly explain how the total revenue for a profit-seeking firm is determined.
Douglas Fur is a small manufacturer of fake-fur boots in Dallas. The following table shows the company’s total cost of production at various production quantities.
On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $155, so you should start your ATC curve by placing a green point at (1, 155). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $95, so you should start your MC curve by placing an orange square at (0.5, 95).)
Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
-Briefly discuss average costs, including how they are calculated, how they are typically appear on a graph, and what they relate to profitability.
-Briefly explain what is meant by the term "fixed costs" and provide three examples of same. What determines a firm's level of fixed costs?
-Briefly explain what is meant by the term "variable costs" and provide three examples of same.
-Briefly explain how the total revenue for a profit-seeking firm is determined.
Chapter 7 Solutions
Principles of Economics (12th Edition)
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- 3. Which of the following is NOT an example of a sunk cost? a) Purchase of a hamburger after starting to eat it b) Purchase of a movie ticket thirty minutes after the film has started c) Purchase of an item on Amazon...fifty days after delivery d) Purchase of a gallon of milk after you start drinking it e) Purchase of a new TV set with the receipt 4. Suppose we have another firm known as Sepanyan Corporation which makes a product known as Yeghias. Suppose the firm’s FC=$8,000 and its TC=$10,000 and its AVC=$5. What is the ATC? a) $25.00 b) $67.50 c) $100.25 d) $200 e) Not enough information 5. Which of the following is true concerning a competitive firm? a) It will produce even when its economic profit is zero b) It prefers not to maximize profits c)t is the only firm in the market d) Its quantity choice will affect the market price e) People’s PED for the firm’s specific product is inelasticarrow_forwardYour uncle is thinking about to open a fish & chips restaurant. He estimated that it would cost $300,000 per year to rent the location, $45,000 to buy the stock and $60,000 to purchase equipment. In addition, he would have to quit his $85,000 per year job as an accountant. How much is his explicit cost, implicit cost, and briefly explain the difference between Accounting profit and Economic profit with examples?arrow_forwardBriefly explain what is meant by the term "fixed costs" and provide three examples of same. What determines a firm's level of fixed costs?arrow_forward
- Douglas Fur is a small manufacturer of fake-fur boots in San Diego. The following table shows the company’s total cost of production at various production quantities. On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $210, so you should start your ATC curve by placing a green point at (1, 210). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $90, so you should start your MC curve by placing an orange square at (0.5, 90).) Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.arrow_forwardQuestion 2 You are the manager of medium-sized company that produces a particular kind of alcoholic beverage (BB Bitters) in Ghana. You purchased most ingredients such as ethanol on a competitive market. One morning, you picked up a copy of the Graphic Business, published by the Graphic Communications Group limited, and read an article indicating that the price of ethanol is expected to rise, forcing manufacturers to produce at a high unit cost. In addition, the article indicated that your competitors are expected to reduce the price per unit of Alomo Bitters. Based on this information, what can you expect to happen to the equilibrium price and equilibrium quantity of your product? Explain your answer with an appropriate diagram.arrow_forward. What is fixed cost? How would you calculate Fixed cost in a graph?arrow_forward
- Suppose the imaginary company of Panthera is a small, Cedar Rapids-based American apparel manufacturer specializing in athleisure. The following table presents the brand’s total cost of production at several different quantities. Fill in the remaining cells of the following table. (Graph is in images)arrow_forwardSuppose Larry runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Larry's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Larry produces. Calculate Larry's marginal revenue and marginal cost for the first seven shirts he produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. Larry's profit is maximized when he produces shirts. When he does this, the marginal cost of the last shirt he produces is , which is than the price Larry receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize his profit) is , which is…arrow_forwardDouglas Fur is a small manufacturer of fake-fur boots in Chicago. The following table shows the company’s total cost of production at various production quantities. Fill in the remaining cells of the following table. On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $200, so you should start your ATC curve by placing a green point at (1, 200). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $80, so you should start your MC curve by placing an orange square at (0.5, 80).) Note: Plot your points in the order in which you would like them connected. Line segments…arrow_forward
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