MICROECONOMICS >IA<
FD Edition
ISBN: 9781260511055
Author: McConnell
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 3P
To determine
Change in the average fixed cost, marginal cost and breakeven price.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Imagine you are running a business that processes horticultural product, and is currently producing 40,000 tonnes of product per year. The average cost of producing 40,000 tonnes is $600 per tonne.
A buyer for a large supermarket chain comes along and offers to buy an extra 10,000 tonnes of your product at a price of $300 per tonne. This price is much less than the average cost of production for the current annual output. With the current production system of the business, the marginal cost per tonne of producing an extra tonne is $200/ton.
1. Would you accept or reject this offer, and why?
2. What principles underlie your reasoning in deciding whether to accept or reject this offer?
You are considering opening a small flower store. You anticipate that you will earn $100,000 each year in revenue. It will cost you $30,000 each year to rent the space necessary to run your business. Additionally, you will need to spend $10,000 each year on flower seeds, utilities, and other expenses necessary to operate your flower shop. You have just graduated from college with a degree in economics and have received an offer to work for a firm with a yearly salary of $70,000.
What is your anticipated economic profit of opening the flower shop?
Midtown Manufacturing Company makes trash cans and plastic buckets, both of which requires labor hours along with time on two machines. Producing a unit of trash cans requires 50 hours of labor, 5 hours on Machine A, and 10 hours on Machine B, while producing a unit of buckets requires 20 hours of labor, 8 hours on Machine A, and 2 hours on Machine B. The Company has available 2000 labor hours, 560 hours for Machine A, and 350 hours for Machine B. Each unit of trash cans brings in $20 in profit for the company and each unit of buckets brings in $3 in profit.
Be sure to write out the system of inequalities expressing these conditions and graph the feasible region.
Find the profit maximizing combinations of trash cans and buckets this company can and should produce.
Chapter 9 Solutions
MICROECONOMICS >IA<
Ch. 9.2 - Prob. 1QQCh. 9.2 - Prob. 2QQCh. 9.2 - Prob. 3QQCh. 9.2 - Prob. 4QQCh. 9.5 - Prob. 1QQCh. 9.5 - Prob. 2QQCh. 9.5 - Prob. 3QQCh. 9.5 - Prob. 4QQCh. 9.8 - Prob. 1QQCh. 9.8 - Prob. 2QQ
Ch. 9.8 - Prob. 3QQCh. 9.8 - Prob. 4QQCh. 9 - Prob. 1DQCh. 9 - Prob. 2DQCh. 9 - Prob. 3DQCh. 9 - Prob. 4DQCh. 9 - Prob. 5DQCh. 9 - Prob. 6DQCh. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 1RQCh. 9 - Which of the following are short-run and which are...Ch. 9 - Prob. 3RQCh. 9 - Indicate how each of the following would shift the...Ch. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4P
Knowledge Booster
Similar questions
- You were recently hired to replace the manager of the Roller Division at a major conveyor- manufacturing firm, despite the manager’s strong external sales record. Roller manufacturing is relatively simple, requiring only labor and a machine that cuts and crimps rollers. As you begin reviewing the company’s production information, you learn that labor is paid $12 per hour and the last worker hired produced 80 rollers per hour. The company rents roller cutters and crimping machines for $15 per hour, and the marginal product of capital is 110 rollers per hour. What do you think the previous manager could have done to keep his job?arrow_forwardYou own a farm that requires spending of $93,318 to generate $275,393 per year. You discover that your farm is sitting on top of an oil-field that could generate $150,186 per year. Your economic profit of continuing to farm on the land is: (your answer must be rounded off to the nearest dollars, i.e., no decimal placesarrow_forwardYou manage a large retail supercenter that sells groceries and other products to 30,000 customers per week. Currently, you employ 80 check-out clerks and 10 automated check-out machines (customers scan and pay for their purchases without a clerk's assistance). Each clerk is paid wages and fringe benefits of 800 dollars per week. It also cost you 800 dollars per week to lease each machine (price includes installation, software support and servicing). A vendor has offered you to lease you additional machines at this price. You estimate that by leasing 10 more machines you can meet your service requirements with 30 fewer clerks. Should you lease the additional machines or continue to service your customers with your current input mix? You conduct additional analysis and estimate that you can service the 30,000 customers with the following combinations of clerks and machines. Calculate the total costs for each of these combinations. What combination of inputs serves the customer at the…arrow_forward
- Suppose you own a small business. Last month, your total revenue was $8,800. In addition, you paid $3,500 in monthly rent for office space, $300 in monthly rent for equipment, $2,500 to your workers in wages for the month, and $1,900 for the supplies you used that month. If you correctly determine that your economic profit last month was $200, then it must be true that your implicit costs are $3,600 per month. your implicit costs are $600 per month. your implicit costs are $400 per month. your implicit costs are $1,800 per month.arrow_forward"Diminishing Returns in Microbrewing? Your microbrewery produces craft beer, using a single vat, various ingredients, and workers. If you double the number of workers and ingredients, but don’t add a second vat, would you expect your output (gallons per hour) to double? Explain.If you double the number of workers and ingredients and add a second vat, would you expect your output (gallons per hour) to double? Explain."arrow_forwardModified 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. Spreading overhead is the process of dividing total fixed costs by more units of output, which implies that average fixed cost declines as quantity declines. Diminishing returns, or decreasing marginal product, imply diminishing marginal cost. At the output level where MR = MC, if the corresponding P is above AVC but below ATC, the loss-minimizing move is to shut down or stop production. A firm that is breaking even, or earning a zero level of profit, is one that is earning exactly a normal rate of return, which implies that new investors are not attracted, but current ones are not running away either. Zero economic profit implies zero accounting profit. In the long run, if price is below average total cost, then it pays to just shut down. The shapes of long-run cost curves follow directly from the assumption of a fixed…arrow_forward
- In this Assignment, you will define and calculate the remaining six major cost elements of a business, when given the Total Costs and the Quantity Produced, as well as to use the computed costs to determine a minimum cost output level for that business. In addition, you will compute both the break-even price and the shut-down price for a hypothetical business in a perfectly competitive market, and determine if that business would incur an economic profit at various market prices, and should the firm continue to produce at each of those price levels. Questions Table 2.a. shows an LED light bulb manufacturer’s total cost of producing LED light bulbs. Table 2.a. Cases of LED light bulbs produced in an hour Total Cost 0 $4,500 10 $4,900 20 $5,100 30 $5,300 40 $5,400 50 $5,700 60 $6,700 70 $7,900 80 $9,700 90 $11,800 1. What is this manufacturer’s fixed cost? Explain why. 2. Assuming that you only know…arrow_forwardSuppose that the production function takes the form X = min(10L, 5K) and that a competitive firm faces a wage rate of £60 per week and a weekly capital rental of £32. (a) How much must the firm spend to produce 100 units of output, and what is the average cost of production when X = 100? (b) What is the incremental cost of producing the 101st unit of output? (c) What happens to the cost of producing 100 units of output if the wage rate and the rental cost of capital rise by 25 per cent each? What happens to the average and marginal cost? (d) What happens to the cost of producing 100 units of output if the wage rate increases by £1, or if the cost of capital increases by £1?arrow_forwardCAN YOU ANSWER QUESTIONS 1 & 2 FOR ME? Suppose that you are the manager of a company that vaccinates human beings for biological diseases. Your company uses two inputs to produce vaccinations: physicians and laboratories. However, this is a short-run analysis where physicians are variable but laboratories are fixed. Suppose that each physician costs $500 per day (for an annual salary of about $175,000) and the daily cost for the laboratory is $1,500 (for rental cost of about $547,500 per year). In the short run, your company has 1 laboratory. The following table presents potential daily production levels with requisite input combinations. Physicians Laboratories Vaccinations (Q) TC TFC TVC MC ATC AFC AVC 0 1 0 1500 1500 0 - - - - 3 1 1 3000 1500 1500 1500 3000 1500 1500 5 1 2 4000 1500 2500 1000 2000 750 1250 6 1 3 4500 1500 3000 500 1500 500 1000…arrow_forward
- Lobo Lighting Corporation currently employs 100 unskilled laborers, 80 factory technicians, 30 skilled machinists, and 40 skilled electricians. Lobo feels that the marginal product of the last unskilled laborer is 400 lights per week, the marginal product of the last factory technician is 450 lights per week, the marginal product of the last skilled machinist is 550 lights per week, and the marginal product of the last skilled electrician is 600 lights per week. Unskilled laborers earn $400 per week, factory technicians earn $500 per week, machinists earn $700 per week, and electricians earn $750 per week. Is Lobo using the lowest cost combination of workers to produce its targeted output? If not, what recommendations can you make to assist the company?arrow_forwardQ1.The following is a Cobb-Douglas production function: Q = 1.75K0.6L0.5. What is correct here? * -This production function displays constant returns to scale -This production function displays increasing returns to scale -A one-percent change in L will cause Q to change by one percent -This production function displays decreasing returns to scale Q2. For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use? * -consumer surveys, where potential customers hear about the product and are asked their opinions -double log functional form regression model -ordinary least squares regression on historical data -market experiments, where the price is set differently in two marketsarrow_forwardYou are the general manager of a firm that manufactures personal computers. Due to a soft economy, demand for PCs has dropped 50 percent from the previous year. The sales manager of your company has identified only one potential client, who has received several quotes for 10,000 new PCs. According to the sales manager, the client is willing to pay 5800 each for 10,000 new PCs. Your production line is currently idle, so you can easily produce the 10,000 units. The accounting department has provided you with the following information about the unit (or average) cost of producing three potential quantities of PCs: 10,000 PCS15,000 PCsMaterials (PC component) $600$600 Depreciation300225 Labor150150 Total unit cost20,000 PCs $ 600150150$1,050 $975 $900 Based on this information, should you accept the offer to produce 10,000 PCs at $800 each? Explain.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning