Microeconomics Chapter 9 Assignment

Which of the following statements is true?

Accounting profit equals sales revenue minus explicit costs.

A firm has fixed costs of $60 and variable costs as indicated in the table below. Complete the table.

Column answers top to bottom Column 2: all answers are 60 Column 4: 60; 105; 145; 180; 210; 245; 285; 330; 385; 450; 525 Column 5: -; 60; 30; 20; 15; 12; 10; 8.57; 7.5; 6.67; 6 Column 6: 45; 42.50; 40; 37.50; 37; 37.50; 38.57; 40.63; 43.33; 46.50 Column 7: 105; 72.5; 60; 52.5; 49; 47.5; 47.14; 48.13; 50; 52.5 Column 8: 45; 40; 35; 30; 35; 40; 45; 55; 65; 75

Which of the following statements is true regarding the costs associated with owning and operating an automobile?

Fixed costs include insurance, and variable costs include gasoline.

Classify the following as fixed or variable costs:

Fuel: Variable costs Interest on company-issued bonds: Fixed costs Shipping charges: Variable costs Payments for raw materials: Variable costs Real estate taxes: Fixed costs Executive salaries: Fixed costs Insurance premiums: Fixed costs Wage payments: Variable costs Depreciation and obsolescence charges: Fixed costs Sales taxes: Variable costs Rental payments on leased office machinery: Fixed costs

Explicit costs are payments the firm makes for

inputs such as wages and salaries to its employees, whereas implicit costs are nonexpenditure costs that occur through the use of self-owned resources such as forgone income.

There are economies of scale in ranching, especially with regard to fencing land. Suppose that barbed-wire fencing costs $10,000 per mile to set up. a. How much would it cost to fence a single property whose area is one square mile if that property also happens to be perfectly square, with sides that are each one mile long? b. How much would it cost to fence exactly four such properties separately, which together would contain four square miles of area? c. Now, consider how much it would cost to fence in four square miles of ranch land if, instead, it comes as a single large square that is two miles long on each side. d. Which is more costly—fencing in the four, one-square-mile properties or the single four-square-mile property?

a. $40,000 b. $160,000 c. $80,000 d. Four, one-square-mile properties

You are a newspaper publisher. You are in the middle of a one-year rental contract for your factory that requires you to pay $500,000 per month, and you have contractual labor obligations of $1 million per month that you can't get out of. You also have a marginal printing cost of $0.25 per paper as well as a marginal delivery cost of $0.10 per paper. a. If sales fall by 20 percent from 1 million papers per month to 800,000 papers per month, what happens to the AFC per paper? It ______ from ______ per paper to ______ per paper b. What happens to the MC per paper? c. What happens to the minimum amount that you must charge to break even on these costs? It ______ from ______ per paper to ______ per paper

a. It rises from $1.50 per paper to $1.88 per paper b. MC does not change c. It rises from $1.85 per paper to $2.23 per paper

Which of the following are short-run and which are long-run adjustments? a. Wendy's builds a new restaurant: b. Harley-Davidson Corporation hires 200 more production workers: c. A farmer increases the amount of fertilizer used on his corn crop: d. An Alcoa aluminum plant adds a third shift of workers:

a. Long-run Adjustment b. Short-run Adjustment c. Short-run Adjustment d. Short-run Adjustment

Indicate how each of the following would shift the (1) marginal-cost curve, (2) average-variable-cost curve, (3) average-fixed-cost curve, and (4) average-total-cost curve of a manufacturing firm. In each case specify the direction of the shift. a. A reduction in business property taxes. b. An increase in the nominal wages of production workers. c. A decrease in the price of electricity. d. An increase in insurance rates on plant and equipment. e. An increase in transportation costs.

a. MC: No Change AVC: No Change AFC: Shift down ATC: Shift down b. Shift up Shift up No change Shift up c. Shift down Shift down No change Shift down d. No change No change Shift up Shift up e. Shift up Shift up No change Shift up

Suppose a firm has only three possible plant-size options, represented by the ATC curves shown in the accompanying figure. What plant size will the firm choose in producing each of the following? a. 50 units of output b. 130 units of output c. 160 units of output d. 250 units of output

a. Plant size 1 b. Plant size 2 c. Plant size 2 d. Plant size 3

Imagine you have some workers and some handheld computers that you can use to take inventory at a warehouse. There are diminishing returns to taking inventory. If one worker uses one computer, he can inventory 100 items per hour. Two workers sharing a computer can together inventory 150 items per hour. Three workers sharing a computer can together inventory 160 items per hour. And four or more workers sharing a computer can together inventory fewer than 160 items per hour. Computers cost $100 each and you must pay each worker $25 per hour. a. If you assign one worker per computer, what is the cost of inventorying a single item? b. What if you assign two workers per computer? What is the cost of inventorying a single item? c. What if you assign three? d. How many workers per computer should you assign if you wish to minimize the cost of inventorying a single item?

a. $1.25 b. $1 c. $1.09 d. 2

Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. a. Linda's accounting profit is b. Linda's economic profit is

a. $300 b. $-100

Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5,000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $4,000 per year if alternatively invested. He has been offered $15,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $3,000 per year. Total annual revenue from pottery sales is $72,000. a. Calculate the accounting profit for Gomez's pottery firm. b. Now calculate Gomez's economic profit.

a. $35,000 b. $13,000

You are considering whether to drive your car or fly 1,000 miles to Florida for spring break. In making your decision you should consider

the variable costs of the trip, the opportunity cost of your time, and the need for transportation in Florida.

A normal profit is considered a cost because

this is the amount required to ensure continued supply of the product.

The explicit costs of going to college include

tuition costs and the cost of books, where implicit costs include forgone income.

a. Complete the following table by calculating marginal product and average product from the data given. b. The total product curve is shown on the left. Plot the marginal product and average product curves from the data in the table above. c. Diminishing returns begin with the addition of the ______ worker

a. Column answers top to bottom Column 3: -; 15; 19; 17; 13; 11; 9; 7; 5 Column 4: -; 15; 17; 17; 16; 15; 14; 13; 12 b. For line AP, graph the points from the table as coordinates (Labor Input, Average Product). For line MP, graph the coordinates as (Labor Input, Marginal Product) c. 3rd