Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 8, Problem 6TY
To determine
Cost schedule of the firm.
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Students have asked these similar questions
A firm’s total cost is $1,000 if it produces one unit, $1,600 if it produces two units, and $2,000 if it produces three units of output. Draw up a table of total, average, and marginal costs for this firm.
Consider a small business that makes pastries. The business has rented a building to be used as its factory and shop floor. The rent of the building is $2,000 per week. The rest of the firm's weekly costs are as follows:
●Income lost from alternative employment - $2,000
●Explicit variable costs - $1,500
●Implicit variable costs - $ 500
i. If the firm sells 1,000 pastries per week, at $6 per pastry, calculate the firm's weekly
●Accounting profit, and
●Economic profit
ii. Based on your answer to part b. i. above, should the firm continue to operate? Why or why not?
iii. Assume that the firm continues at the current output level of 1,000 pastries per week while the prices start to fall. The firm should consider 'shut-down' if the price falls below what dollar value? Explain using relevant calculations and concepts
Suppose the firm achieves total revenue of $1,000 by selling 150 units while facing total costs of $900. If the firm produces and sells 151 units, its total revenue is $1,005, and its total costs are $950. Should the firm produce and sell the extra unit?
Group of answer choices
yes, since marginal profit is positive
yes, since profits are positive
no, since marginal profit is negative
no, since marginal profit is positive
You have recently learned that the company where you work is being sold for $1,000,000. The company's income statement indicates next year's profits of $30,000, which have yet to be paid out as dividends. Assuming the company will remain a "going concern" indefinitely and the interest rate will remain constant at 7%, at what (constant) rate does the owner believe that profits will grow?
(Hint: the price the owner was willing to pay is the present value of the firm's future cash flows)
Group of answer choices
6%
5%
4%
4.5%
Chapter 8 Solutions
Economics: Principles & Policy
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Similar questions
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- Bob'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 variable costs? Question 5 options: All other answers are incorrect They are $25 per lawn They are $27 per lawn We do not have enough information to know the exact structure of variable costs at quantities other than 10 lawns.arrow_forwardUnits of Resource 0 1 2 3 4 5 Total Product 0 10 18 24 28 30 Total Revenue ($) 0 30 54 72 84 90 Refer to the table. The marginal revenue product of the third unit of resource is Group of answer choices $4. $8. $18. $72. A profit-maximizing firm will use additional units of resources for production until Group of answer choices total, average, and marginal cost are equal. total, average, and marginal revenue are equal. the marginal revenue product equals the marginal resource cost. the marginal revenue product is greater than the marginal resource cost. The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of the input employed because of the Group of answer choices law of diminishing returns. law of diminishing marginal utility. homogeneity of the product. free mobility of resources. Units of Resource 0 1 2 3 4 5 Total Product 0 6 11 15 18 20 Total Revenue ($) 0 36 55 60 54…arrow_forwardShowing your analytical work clearly in a step by step manner is a must. Otherwise points will be deducted. You can use Excel or any other graphing tool. A startup software company has indicated its cost, c(x), and revenue, f(x), as given below, such that x is the number of lines of programing code (units in 1000 lines). c(x) = 80000 - 2(x-200)2 f(x) = (x-10)3 + (x+10)2 Find the marginal cost analytically, and draw its graph Find the marginal revenue analytically, and draw its graph Solve for the x point where marginal cost is equal to marginal revenue analytically. Comment why is this point significant analytically. Write the profit function and draw its graph Is the profit function concave up or concave down? Answer all questions neatly pleasearrow_forward
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