Principles of Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134421315
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 7, Problem 1.7P
To determine
Identify short run and long run decisions.
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18. Which of the following are short-run decisions and which arelong-run decisions?a. General Motors decides to add a second shift to itsArlington, Texas production plant.b. Gotham Foods International chooses to exit the restaurantindustry to concentrate on its wholesale grocerysupply business.
c. The Sahara Hotel and Casino in Las Vegas closes two of itsthree hotel towers in response to low demand.d. Tony Andretti, owner of Tony the Taxman, hires five newCPAs to work at his tax preparation business.e. German tool and appliance manufacturer Bosch enters theelectric bicycle industry in 2010.f. General Electric builds a new offshore wind manufacturingplant in the United Kingdom.
Read the following news items and explain where a short-run decision and a long-run decision are involved?Â
 1. June 2, 2020: Tim Horton replaces baristas with vending machines.
 2. June 30, 2020: Tim Horton is closing 200 stores in British Columbia by the end of July
I need full explanation to these questions
1. According to the text, economic profit serves as a beacon to entrepreneurs. This means
a. A positive economic profit sends a warning to investors not to invest more.
b. A negative economic profit sends a signal to investors that it is time to invest more.
c. A zero economic profit sends a warning to investors not to invest more.
d. A positive economic profit attracts resources while a negative economic profit sends resources away.
e. None of the above.
2. The difference between economic profit and accounting profit is
a. Average costs
b. Direct costs
c. Economic costs
d. Variable costs
e. Marginal costs
Chapter 7 Solutions
Principles of Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
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- Explain why a company would shut down in the short run.arrow_forwardThe following discussion describes a new inventorysystem used by J. C. Penney39:In an industry where the goal is rapid turnaroundof merchandise, J.C. Penney stores now holdalmost no extra inventory of house-brand shirts.Less than a decade ago, Penney would have storedthousands of them in warehouses across the U.S.,tying up capital and slowly going out of style.The entire program is designed and operated byTAL Apparel Ltd., a closely held Hong Kong shirtmaker. TAL collects point-of-sale data for Penney’sshirts directly from its stores in North America foranalysis through a computer model it designed.The Hong Kong company then decides how manyshirts to make, and in what styles, colors, andsizes. The manufacturer sends the shirts directlyto each Penney store, bypassing the retailer’swarehouses and corporate decision makers. a. Discuss how this case illustrates the concept ofthe opportunity cost of capital.b. How does this innovation also help in demandmanagement?arrow_forwardWhich of the following is true? AVC=ATC+AFC. AFC will go up in the beginning but will eventually go down. MC= (change in TC)/ (change in Q) FC+MC=TC.arrow_forward
- 10. Read this excerpt from the October 18, 2022, Wall Street Journal.  KINDERHOOK, N.Y.—Golden Harvest Farms has grown from a small apple-growing operation when Doug Grout’s grandfather opened it after World War II, to a multipronged business that includes a retail stand, cider press, distillery, tasting room and barbecue restaurant. But Mr. Grout said he sees a cloudier future for the business due to new state regulations that will require him to increasingly pay more overtime to the farmworkers who pick his apples in the coming years, raising one of his primary costs. “We were looking to buy another orchard, and that whole thing is tabled,” said Mr. Grout, 52 years old, who co-owns Golden Harvest with his father, as he drove between rows of Honeycrisp trees. “We’re stepping away. You’re going to see farms go out of business. This is very shortsighted.”  For the apple market in New York, the new regulations will:  Cause supply to shift to the left, leading to higher prices and a…arrow_forwardDo entry and exit occur in the short run, the long run, both, or neither?arrow_forwardBased on the picture, explain what happens to the level of output. Describe your answerarrow_forward
- Many firms in the United States file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down?arrow_forwardCritically discuss the issues that fixed, variable and semi-variable costs can have on decisions that the management of a company must make regarding the pricing of their products.arrow_forwardBob's lawn mowing service is a profit maximizing, competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawns a day. What can you say about Bob's short run decision regarding shut-down and his long-run decision regarding exit?  Question 3 options:  Bob should stay in business in the short run as well as in the long run  Bob should quit his business immediately  Bob should stay in business in the short run but quit in the long run  None of the other answers are correctarrow_forward
- Why would a firm that is making loss in the short-run choose to operate rather than shut down?arrow_forwardwhat happens to ATC and MC when companies increase the productive capabilities after they invest in human or physical capital, or new technology or they improve their managerial capabilities.arrow_forwardUnder what conditions would a firm decide to shut down in the short run but remain invested in the market in the long run? Explain your reasoning.arrow_forward
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