ECON FINAL
Consider the table, which contains hypothetical data on the long‑run average cost values for the refrigerator industry.
a, c c, d d, f
Suppose Ralph has a chicken processing plant with the total cost function shown in the accopmanying table.
fixed cost: $800 # of workers hired: 8 Why does total cost increase faster as output increases?: There are diminishing returns to labor.
A firm's ___________________ are costs that are incurred even if there is no output. In the short run, these costs ___________________ as production increases.
fixed costs; do not change
One thing that distinguishes the short run and the long run is
the existence of at least one fixed input.
Which of the statements is not true?
- NOT TRUE: Costs that are small and unimportant with little impact on profits are called marginal costs. - Marginal cost and marginal productivity are inversely related. - Marginal cost is the change in a firm's total cost due to a one‑unit change in output. - A marginal cost curve will always intersect the average total cost curve at the minimum average total cost. What is the marginal cost of the eighth unit based on the table? $50
Labor costs represent a large percentage of total costs for many firms. According to data from the Bureau of Labor Statistics, U.S. labor costs were up 2.0% in 2015, compared to 2014.
- increase - increase - increase - increase
The table shows the cost structure of a firm producing computer mainframes. Calculate the missing values A through H and enter these into the boxes provided.
A:20000 B:20000 C:277.78 D:384.16 E: 833.33 F: 833.33 G: 384.62 H: 319.15
Wolfsburg Wagon (WW) is a small automaker. The accompanying table shows WW's long-run average total cost.
a. one, four b. six, eight c. four, six
The long run is best defined as a time period
during which all inputs can be varied.
Consider Daniella's concrete-mixing business described in Problem 12. Assume that Daniella purchased 3 trucks, expecting to produce 40 orders per week.
a. $440, $297 b. $400, smaller, falls
The production of agricultural products like wheat is one of the few examples of a perfectly competitive industry. This question analyzes results from a study released by the U.S. Department of Agriculture about wheat production in the United States in 2016. Round answers to two places after the decimal where necessary. a. The average variable cost per acre planted with wheat was $115 per acre. Assuming a yield of 44 bushels per acre, what is the average variable cost (AVC) per bushel of wheat? AVC: $ per bushel b. The average price of wheat received by a farmer in 2016 was $4.89 per bushel. The average farm would have stayed in operation in the short run.
A. 2.61 B. stayed in operation
Bob produces flower pots for sale, which he designs and manufactures using 3-D printing technology. Bob rents a building for $30,000 per month and rents machinery for $20,000 a month. Those are his fixed costs. His variable cost per month is given in the accompanying table. Quantity of flower potsVC0$01,0005,0002,0008,0003,0009,0004,00014,0005,00020,0006,00033,0007,00049,0008,00072,0009,00099,00010,000150,000 a. The average variable cost (AVC) for a quantity of 6,000 AVC, 𝑄=6,000: $ b. The average total cost (ATC) for a quantity of 4,000 ATC, 𝑄=4,000: $ c. The marginal cost (MC) of increasing production from 8,000 to 9,000 MC: $ d. There is free entry into the industry, and anyone who enters will face the same costs as Bob. Suppose that currently, the price of a flower pot is $25. What will Bob's profit be? Profit: $ e. Is this a long-run equilibrium? If not, what will the price of a flower pot be in the long run? Given the information in part e, this market is to lead to long-run equilibrium.
A. 5.50 b.16.00 c. 27.00 d. 78000 e. not in a long-run equilibrium, and price will have to decrease
The accompanying table presents prices for washing and ironing a man's shirt taken from a survey of California dry cleaners. a. What is the average price per shirt washed and ironed in Goleta and in Santa Barbara? Dry CleanerCityPriceA-1 CleanersSanta Barbara$1.50Regal CleanersSanta Barbara1.95St. Paul CleanersSanta Barbara1.95Zip Kleen Dry CleanersSanta Barbara1.95Effie the TailorSanta Barbara2.00Magnolia TooGoleta2.00Master CleanersSanta Barbara2.00Santa Barbara CleanersGoleta2.00Sunny CleanersSanta Barbara2.00Casitas CleanersCarpinteria2.10Rockwell CleanersCarpinteria2.10Norvelle Bass CleanersSanta Barbara2.15Abitt's Fine CleanersSanta Barbara2.25California CleanersGoleta2.25Justo the TailorSanta Barbara2.25Pressed 4 TimeGoleta2.50King's CleanersGoleta2.50 Averaage price in Goleta: $ Averaage price in Santa Barbara: $
A. Averaage price in Goleta: 2.25 Averaage price in Santa Barbara: 2.00
For each of the following, identify whether the industry is perfectly competitive and why. a. Aspirin is a perfectly competitive industry because there are many manufacturers, it is easy to enter, and there is a standardized product. b. Beyonce concerts are not produced in a perfectly competitive industry because there is only one Beyonce. c. SUVs are not produced in a perfectly competitive industry because there are few SUV producers and SUVs are differentiated.
A. is , many , easy and standierzed B. are not, there is only one Beyonce. C. are not, few, and differentiated.
Marty's Frozen Yogurt is a small shop that sells cups of frozen yogurt in a university town. Marty owns three frozen yogurt machines. His other inputs are refrigerators, frozen yogurt mix, cups, sprinkle toppings, and, of course, workers. He estimates that his daily production function when he varies the number of workers employed (and at the same time, of course, yogurt mix, cups, and so on) is as shown in the accompanying table.
Fixed inputs: - refrigerators - frozen yogurt machines - frozen yogurt shot Variable inputs: - frozen yogurt mix - cups - sprinkle toppings - labor c. Marginal product of the first worker: 110 Marginal product of the second worker: 90 Third worker: 70 Why does marginal product decline as the number of workers increases?: The number of workers increases, but the number of yogurt machines does not. Since additional workers reduce each worker's access to capital, each additional worker contributes less to total output.
Information regarding a firm's costs is presented in the accompanying table.
Total cost, 𝑄=1: $40 𝐴𝑇𝐶, 𝑄=1: $40 𝐴𝑉𝐶, 𝑄=1: $20 Total cost, 𝑄=5: $110 𝐴𝑇𝐶, 𝑄=5: $22 𝐴𝑉𝐶, 𝑄=5: $18
A decreasing marginal product tells us that marginal cost must be rising.
True; a decreasing marginal product implies that additional units of output require larger and larger increments of the variable input; thus, marginal cost increases.
In your economics class, each homework problem set is graded on the basis of a maximum score of 100. You have completed 9 out of 10 of the problem sets for the term, and your current average grade is 88.
a. 89 to 100 b. 0 to 87 c. rise .... fall
Magnificent Blooms is a florist specializing in floral arrangements for weddings, graduations, and other events. Magnificent Blooms has a fixed cost associated with space and equipment of $100 per day. Each worker is paid $50 per day. The daily production function for Magnificent Blooms is shown in the accompanying table.
a. Calculate the marginal product of each worker. 1 worker - 5 2 - 4 3 - 3 4 - 2 5 - 1 What principle explains why the marginal product per worker declines as the number of workers employed increases?: The principle of diminishing returns to an input b. Calculate the marginal cost of each level of output. 5 floral arrangements - $10 9 - $12.50 12 - $16.67 14 - $25 15 - $50 What principle explains why the marginal cost per floral arrangement increases as the number of arrangements increases?: The principle of diminishing returns to an input
In 2017, Tesla Motors released the Model 3. The Model 3 is an all-wheel-drive, luxury sedan. It uses no gasoline and has a range of 220 to 310 miles per charge. Pre-orders for the Model 3 exceeded 450,000 units. To meet demand for the Model 3, Tesla announced it will increase production at its production facility to 6,000 cars per week, or about 300,000 cars per year. Currently, the plant is equipped to produce about 100,000 cars per year.
a. image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit b. - more - more - lowering variable
Classify each statement or equation according to whether it describes average variable cost, marginal cost, or average (total) cost. (TC is total cost; VC is variable cost; Q is quantity.)
image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit
Perfect Competition and the Supply Curve — End of Chapter Problem Over the last three years, Christmas tree prices have increased from an average of $35 per tree to over $75 per tree. How would a Christmas tree farm and the overall industry respond to the price change under the following circumstances? Be sure to explain how your answer depends on the elasticity of supply. a. The price increase is a result of an increase in demand from younger generations, mainly millennials, increasing their desire to purchase real Christmas trees. The Christmas tree farm and the overall industry will respond as follows In the long run, producers exit the market as the price is not high enough to cover costs, and they make losses. In the long run, the price decreases, and the market returns to its perfectly inelastic curve. In the short run, producers earn profits and increase supply. Supply is less elastic in the short run than in the long run. In the short run, the tree farms move down along their marginal cost curves as they have to use fewer inputs. b. The price increase is a result of fewer Christmas tree farms harvesting trees in response to consumers purchasing more artificial trees. The effect of the price increase on the Christmas tree industry will be as follows In the long run, the industry supply curve shifts to the left. In the short run, the tree farms exit the Christmas tree business and grow other lucrative plants. In the long run, as tree farms sell fewer trees, they make losses and exit the industry. In the short run, the increase in price leads to profits for tree farms. Solved
A. In the short run, producers earn profits and increase supply. Supply is less elastic in the short run than in the long run. B. In the short run, the increase in price leads to profits for tree farms.
Evaluate each of the following statements. a. A profit-maximizing firm in a perfectly competitive industry should select the output level at which the difference between the market price and marginal cost is greatest. This statement is false. The firm should select the output where market price is equal to marginal cost. b. An increase in fixed cost lowers the profit-maximizing quantity of output produced in the short run. This statement is false. This change does not impact price nor marginal cost, thus it does not impact the profit-maximizing output in the short run.
A. false. The firm should select the output where market price is equal to marginal cost. B. false. This change does not impact price nor marginal cost, thus it does not impact the profit-maximizing output
Bob produces flower pots for sale, which he designs and manufactures using 3-D printing technology. Bob rents a building for $30,000 per month and rents machinery for $20,000 a month. Those are his fixed costs. His variable cost per month is given in the accompanying table. Quantity of flower potsVC0$01,0005,0002,0008,0003,0009,0004,00014,0005,00020,0006,00033,0007,00049,0008,00072,0009,00099,00010,000150,000 a. Plot Bob's marginal cost curve. Price, costQuantity (in thousands)0123456789101112051015202530354045505560MC b. Over what range of prices will Bob produce no flower pots in the short run?$3.33 to $9.49$3.00 to $13.83$0 to $13.83$0 to $3.00 c. Bob's individual supply curve is the portion of his MC curve starting at a price of$9.49$3.00$0$13.83
A. graph b. Over what range of prices will Bob produce no flower pots in the short run? 0-3 c. Bob's individual supply curve is the portion of his MC curve starting at a price of 3
a. A profit-maximizing business incurs an economic loss of $10,000 per year. Its fixed cost is $15,000 per year. This firm should produce in the short run but exit in the long run if it is a profit-maximizing firm. b. Suppose instead that this business has a fixed cost of $6,000 per year. This firm should shut down in the short run and exit in the long run if it is a profit-maximizing firm.
A. produce in the short run but exit in the long run B. shut down in the short run and exit in the long run
Your roommate is having difficulty understanding how a firm can keep operating despite losing money, earning a negative profit. How will firms respond to losing money? a. If price is below the firm's minimum average variable cost, the firm will shut down, since it will not be able to cover either its fixed costs or its variable costs. b. If price is below the firm's minimum average total cost but above its minimum average variable cost, the firm will continue operating in the short run, since it w
A. shut down not be able to cover either its fixed costs or its variable costs B. continue operating in the short run be able to cover its variable costs and some of its fixed costs .
When marginal cost is above average total cost, average total cost must be falling.
False; when marginal cost is above average total cost, then producing the next unit of output will be more costly than the average, increasing average total cost.
In the long run, choosing a higher level of fixed cost shifts the long-run average total cost curve upward.
False; choosing a higher level of fixed cost causes rightward movement along the long-run average total cost curve. The average total cost curve remains the same.
An increase in fixed cost increases marginal cost.
False; fixed costs do not change with increases in output, so the change in total cost resulting from an increase in production will remain unchanged. Changes in fixed cost do not affect marginal cost.
The short-run average variable cost can never be less than the long-run average total cost.
False; short-run average variable costs do not include fixed costs, so short-run average variable cost may be lower than long-run average total cost for high levels of fixed cost.
Perfect Competition and the Supply Curve — End of Chapter Problem A recent report found that Christmas trees have doubled in price over the last three years. The price surge is partly due to a glut of trees 10 years prior. During the Great Recession of 2008 many consumers reduced their purchases, leading to a surplus of trees and lower prices. Explain how a glut in trees 10 years prior could lead to higher prices today. Focus on how farms changed operations in response to the price decrease. Please select all that help explain the increase in Christmas tree prices. The glut in trees led farms to move up along their marginal cost curves to better deal with the reduced demand. Farms suffer from losses and cut back on production or exit the Christmas tree market due to the fall in demand in 2008. The demand for Christmas trees has increased in recent years due to the economic expansion. It takes seven to ten years for a Christmas tree to reach a height of six to seven feet.
Farms suffer from losses and cut back on production or exit the Christmas tree market due to the fall in demand in 2008. The demand for Christmas trees has increased in recent years due to the economic expansion. It takes seven to ten years for a Christmas tree to reach a height of six to seven feet.
Washington state is the largest producer of apples in the United States. In 2018, farms in Washington produced 171 million bushels of apples, nearly five times more than the next highest-producing state, New York. Many apple farms in Washington depend on migrant labor from Mexico and Central America. These countries were once reliable sources of labor, but farmers are now experiencing a large shortage of labor. Most migrant workers are choosing year-round positions in the construction industry instead of the seasonal work offered in agriculture, leaving apple farms relying on undocumented migrant labor. With fewer undocumented workers, labor costs have soared, forcing many farmers to invest in expensive mechanical harvesting devices. Firms will experience an increase in average fixed costs as they invest in expensive mechanical harvesting devices. Firms who cannot break even due to higher production costs will exit the industry. Firms will experience an increase in average variable costs as labor becomes more expensive. Firms have to cut back on growing apples, and the market supply of apples will decrease.
Firms will experience an increase in average fixed costs as they invest in expensive mechanical harvesting devices. Firms who cannot break even due to higher production costs will exit the industry. Firms will experience an increas e in average variable costs as labor becomes more expensive. Firms have to cut back on growing apples, and the market supply of apples will decrease.
The production function for Marty's Frozen Yogurt is shown in the accompanying table. Marty pays each of his workers $80 per day. The cost of his other variable inputs is $0.50 per cup of yogurt. His fixed cost is $100 per day.
Image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit c. the fixed cost... spreading effect the amount... diminishing... d. 270
An increase in labor productivity means that each worker can produce more output. Recent data on productivity show that labor productivity in the U.S. nonfarm business sector grew by 1.7% between 1970 and 1999, by 2.6% between 2000 and 2009, and by 1.1% between 2010 and 2015.
Increases in labor productivity will lower the cost of production, counteracting the effects of the labor cost increase.
A perfectly competitive firm has the following short‑run total costs and market demand for the firm's product. PriceQuantity demanded$113009500780051,20031,800 Market demand for the firm's product is given by the following market demand schedule: a. Calculate this firm's marginal costs and, for all output levels except zero, the firm's average variable cost and average total cost. QuantityMCAVCATC1 2 3 4 5 6 b. There are 100 firms in this industry that all have costs identical to those of this firm. Plot the short-run industry supply curve (S) and the market demand curve (D). PriceQuantity (in hundreds)012345678910111213141516171819200123456789101112131415SD c. What is the market price? P = $ d. How much profit will each firm earn? Profit = $QuantityMCAVCATC1$5.00$5.00$10.0023.004.006.5035.004.336.0047.005.006.2559.005.806.80611.006.677.50
QuantityMCAVCATC1$5.00$5.00$10.0023.004.006.5035.004.336.0047.005.006.2559.005.806.80611.006.677.50
An increase in fixed cost increases the minimum-cost output.
True; if fixed costs increase, the spreading effect strengthens relative to the diminishing returns effect. Accordingly, the level of output that minimizes average total cost rises.
The short-run average total cost can never be less than the long-run average total cost.
True; the long-run average total cost is given by the ideal level of fixed input, whereas short-run average total cost is given by an arbitrary level of fixed input.
The production function for Marty's Frozen Yogurt is shown in the accompanying table. Marty pays each of his workers $80 per day. The cost of his other variable inputs is $0.50 per cup of yogurt. His fixed cost is $100 per day.
Variable cost, 𝑄=110: $135 Variable cost, 𝑄=200: $260 Variable cost, 𝑄=270: $375 Variable cost, 𝑄=300: $470 Total cost, 𝑄=320: $660 Total cost, 𝑄=110: $235 Total cost, 𝑄=200: $360 Total cost, 𝑄=270: $475 Total cost, 𝑄=300: $570 Variable cost, 𝑄=320: $560 𝑀𝐶,𝑄=110 to 𝑄=200: $1.39 𝑀𝐶,𝑄=300 to 𝑄=320: $4.50
Candice is a jewelry shop owner, specializing in beaded necklaces. For each of the following inputs, indicate which items are variable inputs as opposed to fixed inputs in the long run.
Variable inputs include: computers shipping two-year lease on office and retail space chairs hourly labor upper management salaries beads
Many colleges and universities are witnessing a shift in demographics due to women having fewer children today. The birth rate fell from an average of 2.1 births per woman in 2007 to 1.7 births in 2018. The declining birth rate will reduce the college-age population by as much as 15% between 2025 and 2029. Consider how the declining birth rate will affect university operations.
a. fixed costs: - salaries and benefits... - upkeep and university... - land and building... - maintenance of research... variable costs: - compensation of... - cafeteria staff... b. large c. it will rise substantially
Complete the following passage to describe the difference between diminishing marginal returns to labor and decreasing returns to scale.
a. A decline in marginal product...4....short run b. In increase in average total... 99...long run
Determine if the statements and expressions regarding costs are true or false.
a. All costs are either fixed or variable: True b. Average fixed cost is always higher than average variable cost: False c. The average fixed cost curve is downward-sloping: true d. In the short run, ATC is always greater than or equal to AVC: true e. The ATC curve crosses the MC curve at the lowest point on the MC curve: false f: true g. The ATC is increasing whenever the MC is increasing: false h. Marginal cost refers to the change in total cost associated with the production of another unit: true i. The VC curve is modeled as a horizontal line: false j: false
Consider Bob's flower pot company, whose costs are described in the accompanying table. Assume that flower pot production is a perfectly competitive industry. Quantity of flower potsVC0$01,0005,0002,0008,0003,0009,0004,00014,0005,00020,0006,00033,0007,00049,0008,00072,0009,00099,00010,000150,000 a. Bob's break-even price is $ Bob's shutdown price is $ b. Suppose the price of a flower pot is $2. What should Bob do in the short run? Bob should shut down in the short run. keep producing in the short run. c. At a price of $7, Bob's profit-maximizing quantity is and his total profit is when producing that quantity. At a price of $7, Bob should in this industry. d. At a price of $20, Bob's profit-maximizing quantity is and his total profit is when producing this quantity. At a price of $20, Bob should in this industry.
a. Bob's break-even price is $ 13.83 Bob's shutdown price is $ 3 b. Suppose the price of a flower pot is $2. What should Bob do in the short run? Bob should shut down in the short run. c. At a price of $7, Bob's profit-maximizing quantity is 5,000 and his total profit is -$35,000 when At a price of $7, Bob should produce in the short run but exit in the long run d. At a price of $20, Bob's profit-maximizing quantity is 7,000 and his total profit is $41,000 when producing this quantity. At a price of $20, Bob should produce in the short run and the long run
Daniella owns a small concrete-mixing company. Her fixed cost is the cost of the concrete-batching machinery and her mixer trucks. Her variable cost is the cost of the sand, gravel, and other inputs for producing concrete; the gas and maintenance for the machinery and trucks; and her workers. She is trying to decide how many mixer trucks to purchase. She has estimated the costs shown in the accompanying table based on estimates of the number of orders that her company will receive per week.
a. For each level of fixed cost (i.e., for each number of mixer trucks), calculate Daniella's total cost of producing 20, 40, and 60 orders per week. 20 orders 2 trucks: $8,000 60, 2: $18,000 40, 2: $11,000 30, 3: $8,800 60, 3: $17,800 40, 3: $10,800 20, 4: $9,200 40, 4: $11,600 60, 4: 16,400 b. If Daniella is producing 20 orders per week, how many trucks should she purchase, and what will her average total cost be? Round average total cost to the nearest dollar. - two - $400 If Daniella is producing 40 orders per week, how many trucks should she purchase, and what will her average total cost be? Round the average total cost to the nearest dollar. - three - $270 If Daniella is producing 60 orders per week, how many trucks should she purchase, and what will her average total cost be? Round the average total cost to the nearest dollar. - four - $273
The first sushi restaurant opens in town. Initially, people are very cautious about eating tiny portions of raw fish, as this is a town where large portions of grilled meat have always been popular. Soon, however, an influential health report warns consumers against grilled meat and suggests that they increase their consumption of fish, especially raw fish. The sushi restaurant becomes very popular and its profit increases.
a. In the short run, we expect other firms to enter because of positive profits, and, in the long run, we expect prices to decrease and the profit for the original sushi restaurant to decrease in the town's sushi restaurant industry. b. Local steakhouses suffer from the popularity of sushi and start incurring losses. In the long run, we expect the number of steakhouses to decrease in town.
Everything Looks Like a Nail, Inc. is a manufacturing company that produces hammers. The company faces various fixed and variable costs in the short run. Determine which of Everything Looks Like a Nail's costs are fixed costs and which are variable costs. Assume the company cannot easily adjust the amount of capital that it uses and that salaries are negotiated only once per year.
a. Postage and packaging costs: variable cost. b. Lease on building: fixed cost. c. Cost of wood used in manufacturing: variable cost. d. Industrial equipment costs: fixed cost. e. Interest on current debt: fixed cost f. Liability insurance costs: fixed cost g. Cost of metal used in manufacturing: variable cost h. Annual salaries of top management: fixed cost
Changes in the prices of key commodities have a significant impact on a company's bottom line. For virtually all companies, the price of energy is a substantial portion of their costs. In addition, many industries, such as those that produce beef, chicken, high-fructose corn syrup, and ethanol, are highly dependent on the price of corn. In particular, corn has seen a significant increase in price.
a. There is usually a fixed energy cost associated with overhead that does not change with output, but producing more output typically takes more energy. c. Corn is a raw ingredient in the production of ethanol. An ethanol producer adjusts its corn purchases to meet its ethanol production targets
You produce widgets. Currently, you produce four widgets at a total cost of $40.
a. What is your average total cost?: $10 b. Suppose you could produce one more (the fifth) widget at a marginal cost of $5. If you do produce that fifth widget, what will your average total cost be?: $9 Has your average total cost (ATC) increased or decreased? Why? - ATC has decreased, since marginal cost is below ATC. c. Suppose instead that you could produce one more (the fifth) widget at a marginal cost of $20. If you do produce that fifth widget, what will your average total cost be?: $12 Has your ATC increased or decreased? Why? - ATC has increased since marginal cost is above ATC.
For each of the following, determine if the business is a price-taking producer and why. a. A cappuccino café in a university town where there are dozens of very similar cappuccino cafés is considered a price taker because there are many producers and a standardized product.b. The makers of Pepsi are not considered a price taker because there is one manufacturer of Pepsi and a differentiated product.c. One of many sellers of zucchini at a local farmers' market is considered a price taker because there are many producers and a standardized product.
a. considered a price taker because there are many producers and a standardized b. not considered a price taker because there is one manufacturer of Pepsi and a differentiated c. considered a price taker because there are many producers and a standardized
A new vaccine against a deadly disease has just been discovered. Presently, 55 people die from the disease each year. The new vaccine will save lives, but it is not completely safe. Some recipients of the shots will die from adverse reactions. The projected effects of the inoculation are given in the accompanying table. Percent ofpopulationinoculatedTotal deathsdue todiseaseTotal deathsdue toinoculation055010450203613028340216501510601015706208032590130100035 a. The "marginal benefit" is the and the "marginal cost" is in this problem. What is the marginal benefit of increasing from 40% to 50% inoculation? MB: What is the marginal cost of increasing from 70% to 80% inoculation? MC: b. The optimal percentage of the population that should be inoculated is . c. The interpretation of "profit" is the in this problem. What is the "profit" of inoculating 40% of the population? profit:
additional lives saved due to inoculation, additional deaths due to inoculation MB: 6 MC: 5 The optimal percentage: 60%
Given the assumptions of a perfectly competitive industry, explain why firms operating in that industry are reluctant to invest in new technological development. Firms in a perfectly competitive industry are reluctant to invest in new technological development due to free entry and exit of firms. If any firm invested in new technology and earned profits, other firms will enter the market, which will cause the price to fall and the profits to get eroded. Furthermore, due to the product being standardized and producers being price-takers, they cannot charge a higher price and recoup their investment.
free entry and exit of firms enter standardized price-takers
Each graph illustrates three short-run cost curves for firms, where ATC is average total cost (also referred to as average cost), MC is marginal cost, and AVC is average variable cost.
graph in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit
The graph shows the costs of a firm in the short run. Match the labels to the curves they best represent. Note that not all labels will be used.
image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit
Sandra and Trey operate a small company that produces souvenir footballs. Their fixed cost is $2,000 per month. They can hire workers for $1,000 per worker per month. Their monthly production function for footballs is as given in the accompanying table.
image in link: https://docs.google.com/document/d/1T96Tm3Y3NCOMsv0D_r8MXSVQ_k9V6IZU8tIcmMt1c2E/edit c. 1,200
A firm's ___________________ are costs that increase as quantity produced increases. These costs often show ___________________ illustrated by the increasingly steeper slope of the total cost curve.
variable costs; diminishing marginal returns
