Microeconomics 20th Edition Community College of Philadelphia Custom
17th Edition
ISBN: 9781308150468
Author: McConnell
Publisher: MCG/CREATE
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Chapter 9, Problem 8DQ
To determine
Additional production and economies of scale.
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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.
With current technology, suppose a firm is producing 400 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60, $60, and $20, respectively. If the firm can sell these 400 loaves at $2 per unit, what is its total revenue? Its total cost? Its profit or loss? Will it continue to produce banana bread? If this firm’s situation is typical for the other makers of banana bread, will resources flow toward or away from this bakery good?
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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- Answer the following questions on the basis of this information for a single fifirm: total cost of capital = $1000; price paid for labor = $12 per labor unit; price paid for raw materials = $4 per raw-material unit. a. Suppose the firm can produce 5000 units of output by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 5000 units of output?b. Now assume the firm improves its production process so that it can produce 6000 units of output by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average cost of producing the 6000 units of output?c. Refer to your answers to 8a and 8b and explain how process innovation can improve economic efficiency.arrow_forward4.Distinguish between explicit and implicit costs, giving examples of each. What are some explicit and implicit costs of attending college? LO2arrow_forwardA software company in Silicon Valley uses programmers (labor) and computers (capital) to produce apps for mobile devices. The firm estimates that when it comes to labor, MPL = 5 apps per month while PL = $1,000 per month. And when it comes to capital, MPC = 8 apps per month while PC = $1,000 per month. If the company wants to maximize its profits, it should: LO16.5 a. Increase labor while decreasing capital. b. Decrease labor while increasing capital. c. Keep the current amounts of capital and labor just as they are. d. None of the above.arrow_forward
- Andie 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_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_forwardSuppose, 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 35arrow_forward
- 18) The per-unit cost of an item is its average total cost (= total cost/quantity). Suppose that a new cell phone application costs $150,000 to develop and only $0.50 per unit to deliver to each cell phone customer. Instructions: Round your answers to 2 decimal places. a. What will be the per-unit cost of the application if it sells 100 units? b. What will be the per-unit cost of the application if it sells 1,000 units? c. What will be the per-unit cost of the application if it sells 1 million units?arrow_forwardDoes additive manufacturing rely on economies of scale to deliver low costs? What are two ways in which additive manufacturing lowers costs? Besides what’s written in the book, might there be another reason to expect 3-D blueprints to be inexpensive? (Hint: Think in terms of supply and demand.)arrow_forwardThe per-unit cist of an item is its average total cost=(=total cost/quantity). Suppose that a new cell phone application costs $100,000 to develop and only $0.70 per unit to deliver to each cell phone customer. What will be the per-unit coat of the application if it sells 100 units? What will be the per-unit coat of the application if it sells 1,000 units? What will be the per-unit cost of the application if it sells 1 million units?arrow_forward
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