Econ 202 Homework for Chapter 14

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal

$1,000. TFC= (ATC-AVC)units TFC=(3-1)500 = 1,000

Katherine gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are

$100, and her economic profits are $25

Refer to Table 14-10. What is the average fixed cost for the month if 9 instructional modules are produced?

$120.00

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

$170 1,000x.03= $30 2,000x.07=$140 $140+$30= $170

Cindy's Car Wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units of output (car washes). The firm's total cost is

$500

What is the average variable cost for the month if 6 instructional modules are produced?

$533.33 3200/6=533.33

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100,

. average variable cost is $3 Variable costs (VC) = TC - FC = $1,000 - $100 = $900 AVC = VC / Quantity of output AVC = $900 / 300 units = $3 per unit

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?

15 boquets

Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year. Refer to Scenario 14-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?

18,000 200,000x.06=12,000 200,000X.03=6,000

Refer to Table 14-10. What is the marginal cost of creating the tenth instructional module in a given month?

2,500

What is the total output when 1 worker is hired?

30

How many instructional modules are produced when marginal cost is $1,300?

8

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?

8 houses

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is

8 units of output

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000, and she spent $1,000 on materials and supplies. Which of the following statements is correct?

Bev's economic profit is $3,700.

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.

If a firm produces nothing, which of the following costs will be zero?

Variable cost

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000

average fixed cost is 50 cents

A firm's opportunity costs of production are equal to its

explicit costs + implicit costs.

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

implicit costs

A difference between explicit and implicit costs is that

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do

An example of an explicit cost of production would be the

lease payments for the land on which a firm's factory stands.

Refer to Figure 14-1. As the number of workers increases,

marginal product decreases.

The graph illustrates a typical

production function.

If a firm uses labor to produce output, the firm's production function depicts the relationship between

the number of workers and the quantity of output.

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be

−$3,875. 95(275)-100(300)=-3875