Chapter 7 Homework

(Figure 7.11) The short-run total cost curve is represented by the letters _____, and the long-run total cost curve is represented by the letters _____.

WXY; ZXA

Debbie, a popular wedding photographer, is able to photograph a wedding every Saturday of the year. She charges couples $4,000 for a complete set of photographs that cost her $2,200 to print and develop. Suppose that on one Saturday Debbie photographs her niece's wedding without charge, but her niece insists on paying Debbie $2,200 to cover her printing and developing costs. What is Debbie's economic cost of photographing her niece's wedding?

$1,800

(Figure 7.1) The total cost of producing 7 units of output is:

$500.

(Figure 7.8) The average fixed cost at 70 units of output is _____, and the firm's fixed cost of production is _____.

$7; $490

A firm is producing 4 units of output at an average total cost of $40. When the firm produces 5 units of output, average total cost rises to $50. What is the marginal cost of the fifth unit of output?

$90

Which of the following statements is (are) TRUE? I. The firm's total cost is the sum of its fixed and variable costs. II. Over the long term, the costs of the firm's input tend to become fixed. III. In the long run, the firm can adjust the use of all of its inputs.

I and III

(Figure 7.7) Which of the following statements is (are) TRUE? I. At Q = 3, the marginal cost is $2.33. II. At Q = 8, the marginal cost is $1.80. III. The slope of the total cost (TC) curve at Q = 3 is $2.33.

II

Suppose a firm's total cost is given by TC = 100 + 4Q + 2Q2. Which of the following statements is (are) TRUE? I. AVC = 4Q + 2Q2 II. AFC = 100/Q III. ATC = 2Q + 4 + 100/4 IV. FC = 100 + 4Q

II and III

Which of the following statements is (are) TRUE?

The long-run average total cost curve is derived by tracing out all of the firm's short-run average total cost curves.

An entrepreneur gathers the following information to make a decision on whether to stay open for business or to shut down permanently: Future operating revenues = $18 million Future operating costs = $14 million Sunk costs = $8 million The entrepreneur should:

continue to operate because the operating revenues exceed the operating costs.

(Figure 7.5) The firm's average total cost curve appears in which of the following panels?

panel d

Which of the following factors are likely to result in fewer fixed costs?

longer time horizons

(Figure 7.2) Consider a firm with the following cost structure: Q0: TC = 100 Q1: VC = 50 Q2: VC = 100 Q3: TC = 250 Which panel represents the cost curves of the firm?

panel a