Microeconomics 20th Edition Community College of Philadelphia Custom
17th Edition
ISBN: 9781308150468
Author: McConnell
Publisher: MCG/CREATE
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Chapter 9, Problem 6RQ
To determine
Calculate different costs.
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Suppose, for producing 250 tables, the total cost of production is R.O 8,750. Determine the average cost of production.
a.
R.O 42
b.
R.O 53
c.
R.O 24
d.
R.O 35
For LG Company, the total cost of producing 200 refrigerators is R.O 48,000. When the company produced one more refrigerator, the total costs increased to R.O 48,250. What is the marginal cost of production here?
a.
R.O 200
b.
R.O 180
c.
R.O 230
d.
R.O 250
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.
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…
Chapter 9 Solutions
Microeconomics 20th Edition Community College of Philadelphia Custom
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
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- Average total cost tells us the O 1) cost of the last unit of output, if total cost does not include a fixed cost component. 2) variable cost of a firm that is producing at least one unit of output. 3) O 4) total cost of the first unit of output, if total cost is divided evenly over all th units produced. cost of a typical unit of output, if total cost is divided evenly over all the uni produced.arrow_forward3. Average Fixed Cost is the a. horizontal distance (at any particular cost level) between ATC and AVC d. vertical distance (at any particular quantity) between AVC and the horizontal axis b. vertical distance (at any particular quantity) between ATC and AVC e. horizontal distance (at any particular cost level) between ATC and the vertical axis c. vertical distance (at any particular quantity) between ATC and the horizontal axis Choose and explain your answer above thoroughly--graphical, algebraically, numerically. Please use a graph in your answer and use as much detail as possible.arrow_forwardFor producing 200 chairs, the total fixed cost is R.O 2,000 and total variable cost is R.O 1,500. Find the total cost of production. a. R.O 200 b. R.O 1,500 c. R.O 2,000 d. R.O 3,500arrow_forward
- 8. Why can the distinction between fixed costs and variable costs be made in the short run? Classify the following as fixed or variable costs: advertising expenditures, fuel, interest on company-issued bonds, shipping charges, payments for raw materials, real estate taxes, executive salaries, insurance premiums, wage payments, sales taxes, and rental payments on leased office machinery. LO4arrow_forward3. Average Fixed Cost is the a. the horizontal distance (at any particular cost level) between ATC and AVC d. vertical distance (at any particular quantity) between AVC and the horizontal axis b. vertical distance (at any particular quantity) between ATC and AVC e. the horizontal distance (at any particular cost level) between ATC and the vertical axis c. vertical distance (at any particular quantity) between ATC and the horizontal axis Choose and explain your answer above thoroughly--graphical, algebraically, numerically.arrow_forwardAndie is considering leaving her job as attorney to pursue her passion by starting a dog grooming business. She currently takes home $6000 per month from her job. She pays $2000 per month to rent her house . if she were to start the dog grooming business, she would operate it out of the currently unused room at the back of her house and she would work at it fulltime. She would hire additional workers and pay them a total of$3000 per month , while spending $1000 per month on materials . she already has everything else she needs to start the business. What are the monthly economic costs of Andies potential dog grooming business.arrow_forward
- The table shows three short-run cost schedules for three plants of different sizes that a firm might build in the long run. Plant 1 Plant 2 Plant 3 Output ATC Output ATC Output ATC 10 $ 10 10 $ 15 10 $ 20 20 9 20 10 20 15 30 8 30 7 30 10 40 9 40 10 40 8 50 10 50 14 50 9 What is the long-run average cost of producing 10 units of output? Multiple Choice $10 $15 $20 $45arrow_forwardA firm produces output (y) using two inputs, labor (L) and capital (K), according to the following Cobb-Douglas production function: y = f(L, K) = Lº25 K0.75. Assuming that we draw the isoquant map with labor on the horizontal axis and capital on the vertical axis, what is the slope of this firm's isoquant when L = 120 and K = 60? Give your answer to two decimal places and remember that the sign matters when describing the slope of an isoquant.[_____________] Part 2 : See Hint Assume that L = 120 and K = 60 and suppose that the firm decides to reduce its use of capital and replace those machine hours with some additional labor hours. Approximately how many labor hours will the firm need to add for each machine hour it cut in order to maintain the same level of output (i.e., stay on the same isoquant)? Give your answer to two decimal places. [__________] labor hoursarrow_forwardRefer to the table below. Quantity Cost (in dollars) Fixed Costs (in dollars) Total Costs (in dollars) Average Total Costs (in dollars per unit) Average Variable Costs (in dollars per unit) Marginal Costs (in dollars per unit) 0 0 40 40 - - - - - - 1 15 40 55 55 15 15 2 35 40 75 37.5 17.5 20 3 60 40 100 33.3 20 25 4 90 40 130 32.5 22.5 30 5 125 40 165 33 25 35 6 160 40 200 33.3 26.6 40 If this information were used to create a total cost graph, the curve should Question 6 options: begin at 40 on the vertical axis and slope upward. become steeper as quantity increases. become steeper due to diminishing returns. reflect all of the above.arrow_forward
- QUESTION 1a. Is it possible to have diminishing returns to a single factor of production and constant returnsto scale at the same time? Discuss.b. Isoquants can be convex, linear, or L-shaped. What does each of these shapes tell you aboutthe nature of the production function? What does each of these shapes tell you about theMRTS?QUESTION 2a. A firm faces the following average revenue (demand) curve:P = 120 − 0.02Qwhere Q is weekly production and P is price, measured in cents per unit. The firm’s costfunction is given by C = 60Q + 25,000. Assume that the firm maximizes profits.i. What is the level of production, price, and total profit per week?ii. If the government decides to levy a tax of 14 cents per unit on this product, what will be thenew level of production, price, and profit?b. The United States currently imports all of its coffee. The annual demand for coffee by U.S.consumers is given by the demand curve Q = 250 – 10P, where Q is quantity (in millions ofpounds) and P is the…arrow_forwardMultiple choice - microeconomics 45) Refer to Figure 13-2. What does the changing slope of the total-cost curve reflect? A. decreasing marginal cost B. decreasing marginal product C. decreasing average variable cost D. decreasing average total cost 44) What distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm? A. In the short run the size of the factory is fixed B. In the short run there are no fixed costs C. In the short run the number of workers used to produce the firm’s product is fixed. D. In the short run output is not variable.arrow_forwardThe data in the table below represents Total product (TP), for an agri-business involved in potato production. Capital (fixed factor) Labor (variable factor) Output(units) or Total physical product (TPPL) Average physical product (APPL) Marginal physical product (MPPL) 10 0 0 10 1 7 10 2 20 10 3 39 10 4 55 10 5 66 10 6 70 10 7 70 10 8 67 Calculate the marginal product and average product value. At what point do diminishing marginal returns set in? And using the values of AP and MP obtained from part (i), plot the graphs of TP, AP and MP being careful to fully label the graph and explain briefly the law of diminishing marginal returns from your computation. How does the hypothesis of diminishing returns (MP& AP) influence the behaviour of costs (MC& AC)?arrow_forward
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