Microeconomics: Chapter 22 Homework

From the perspective of the​ firm, what is the difference between the short run and the long​ run?

In the short​ run, at least one input is​ fixed, while in the long run all inputs are variable.

In​ economics, the planning horizon is defined as

the long​ run, during which all inputs are variable

The law of diminishing marginal returns is caused by

the existence of a fixed input that must be combined with increasing amounts of the variable input.

When the total product function begins to increase at a decreasing​ rate,

A. marginal product is falling. B. the law of diminishing returns has set in. C. marginal cost is rising. D. All of the above. Click to select your answer and then click Check Answer. D: all of the above Since the total product function begins to increase at a decreasing​ rate, the marginal product is​ falling, diminishing returns are​ occurring, and marginal cost is rising.

Which of the graphs represents the correct relationship among the cost​ curves?

ATC must always be above​ AVC, since ATC includes AVC. MC above ATC ATC above AVC AVC above AFC

On the​ graph, where do economies of scale​ exist?

Economies of scale exist over a range of​ output, representing a range of plant​ sizes, not at a point. When the firm is experiencing economies of​ scale, the​ long-run average, or​ per-unit, costs fall. In the range of outputs from A to B.

The diagram to the right displays​ short-run cost curves for a facility that produces liquid crystal display​ (LCD) screens for cell phones. What are the daily total fixed costs of producing 350 LCD​ screens What are the total variable costs of producing 350 LCD screens per​ day? What are the total costs of producing 350 LCD screens per​ day? What is the average total cost of producing 350 LCD​ screens?

Fixed Costs​ = AFC times Q. Variable Costs​ = AVC times Q. Total Costs​ = VC​ + FC. Average Total Costs = TC / Q 1,001 1421 2422 6.9

Suppose that a company currently employs 3,000 workers and produces 5 million units of output per month. Labor is its only variable​ input, and the company pays each worker the same monthly wage. The​ company's current total variable costs equal ​$6 million. What are average variable costs at this​ firm's current output​ level? ​

Since Average Variable Cost​ = TVC/Total Output 6000000/5000000 = 1.2 5000000/2000000 = 2.5 Average product is the total product divided by the number of workers per week​ = Total Product or Output/total Workers or Input = 5000000/3000 = 1666.67 2000000/1500 = 1333.33 The monthly wage is the variable cost ​($6​,000,000) divided by the number of workers ​(3,000​) ​= 2000 5000000/1500

During autumn​ months, passenger railroads across the globe deal with a condition called slippery rail. It results from a combination of​ water, leaf​ oil, and pressure from the​ train's weight, which creates a slippery black ooze that prevents trains from gaining traction. One solution for slippery rail is to cut back trees from all of a rail​ firm's rail network on a regular​ basis, thereby helping prevent the problem from developing. If​ incurred, would this railroad expense be a better example of a fixed cost or a variable​ cost? Why?

This is an example of a fixed cost because the cost​ doesn't vary with the number of trains.

Another way of addressing slippery rail is to wait until it begins to develop. Then the company purchases sand and dumps it on the slippery tracks so that trains already en route within the rail network can proceed. If​ incurred, would this railroad expense be a better example of a fixed cost or a variable​ cost? Why?

This is an example of a variable cost because the cost varies with the number of trains.

The marginal product is the change in product divided by the change in input. Diminishing returns occurs when the marginal product decreases.

Total Input​ (Labor) Total Product​ (Televisions) 1 12 2 25 3 39 4 50 5 60 6 58 7 54 8 48 Returns to the variable input are identified by the behavior of the marginal product. When the marginal product increases​, there are increasing returns to the variable input. In the table​ above, when the​ 1st, 2nd, and 3rd workers are​ added, there are increasing returns to the variable input since the marginal product is​ 12, 13, and 14. When the marginal product decreases​, there are diminishing returns to the variable input. In the table​ above, diminishing returns begins with addition of the worker number 4. When the marginal product is negative, there are negative returns to the variable input. In the table​ above, the marginal product becomes negative when the 6th worker is added.

The law of diminishing marginal returns shows the relationship between

inputs and outputs for a firm in the short run. Diminishing marginal returns is a​ short-run concept, and is not relevant in the long run when all inputs can be varied. The law of diminishing marginal returns shows the relationship between inputs and outputs for a firm in the​ short-run. It refers to the eventual decrease in the marginal physical product. The marginal physical product is the change in output divided by the change in input.

The wage rate divided by marginal product equals

marginal cost. Since the marginal cost is the change in total​ cost/change in​ output, the change in total cost when another worker is added is the additional wage of another​ worker, and the change in output is the marginal product of another worker.

The academic calendar for a university is August 15 through May 15. A professor commits to a contract that binds her to a teaching position at this university for this period. Based on this​ information, the short run for the professor

will be the nine month period between August 15 and May​ 15; any time period longer than this will be long run for her