MICROECON Unit 5 Questions

https://imgur.com/0gAinyW Refer to the above data. The marginal cost of producing the sixth unit of output is: - $24 - $12 - $16 - $8

$69 - $61 = $8

https://imgur.com/pqAre4z Refer to the above diagram. At output level Q total variable cost is: - 0BEQ - BCDE - 0CDQ - 0AFQ

0BEQ (Average Variable Cost/AVC @ Output lvl Q is B)

https://imgur.com/ES1aTtw Refer to the above diagram. At output level Q total cost is: - 0BEQ. - BCDE. - 0BEQ plus BCDE. - 0AFQ plus BCDE.

0BEQ plus BCDE. (This maybe a misunderstanding on my part, but what we want to find total cost is total variable and total fixed costs, which the former is represented by 0BEQ, and BCDE is one of the 2 options for finding fixed costs, the one being used in this case is Total - Variable (the other is 0AFQ))

Average total cost is very high when a small amount of output is produced because - Marginal cost is high. - Average fixed cost is high. - Marginal product is high. - Average variable cost is high.

13-3c Cost Curves and Their Shapes [U-Shaped Average Total Cost], "Average fixed cost always declines as output rises because the fixed cost is getting spread over a larger number of units. Average variable cost usually rises as output increases because of diminishing marginal product."

https://imgur.com/CpCjdje Refer to the above data. The average total cost of producing 3 units of output is: - $14 - $12 - $13.50 - $16

Average Cost = Total Cost / Output (48 / 3 = $16)

To economists, the main difference between the short run and the long run is that: - The law of diminishing returns applies in the long run, but not in the short run. - In the long run all resources are variable, while in the short run at least one resource is fixed. - Fixed costs are more important to decision making in the long run than they are in the short run. - In the short run all resources are fixed, while in the long run all resources are variable.

13-4a The Relationship between Short-Run and Long-Run Average Total Cost, "Because many decisions are fixed in the short run but variable in the long run, a firm's long-run cost curves differ from its short-run cost curves." Note: Many does not mean all

https://imgur.com/qdGYpaA As the firm in the above diagram expands from plant size #1 to plant size #3, it experiences: - Diminishing returns. - Economies of scale. - Diseconomies of scale. - Constant costs.

13-4b Economies and Diseconomies of Scale, "When long-run average total cost declines as output increases, there are said to be economies of scale. When long-run average total cost rises as output increases, there are said to be diseconomies of scale." (When the long-run average doesn't vary as output increases, it is referred to as constant returns by scale)

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were: - $100,000 and its economic profits were zero. - $200,000 and its economic profits were zero. - $100,000 and its economic profits were $100,000 - Zero and its economic loss was $200,000.

4,000*30 = $1,200,000 Accounting Profit = Total revenue - Total explicit costs (1.2 mil - 1 mil = $200,000) Economic Profit = Total revenue - (Total explicit + Implicit costs) (1.2 mil - 1.2 mil = $0)

The basic characteristic of the short run is that: - Barriers to entry prevent new firms from entering the industry. - The firm does not have sufficient time to change the size of its plant. - The firm does not have sufficient time to cut its rate of output to zero. - A firm does not have sufficient time to change the amounts of any of the resources it employs.

5-2a The Price Elasticity of Supply and Its Determinants, "Over short periods of time, firms cannot easily change the size of their factories to make more or less of a good." Essentially, this is used to explain why on the short run, supply is inelastic (at least compared to its more elastic counterpart in the long run)

"As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters - Economies of scale. - Increasing marginal product. - Diminishing marginal product. - Diseconomies of scale."

According to the Property of Diminishing Marginal Product, the marginal product of an input declines as the quantity of the input increases.

https://imgur.com/1EvgFDv Refer to the above diagram. At output level Q: - Marginal product is falling. - Marginal product is rising. - Marginal product is negative. - One cannot determine whether marginal product is falling or rising.

According to the Property of Diminishing Marginal Product, the marginal product of an input declines as the quantity of the input increases. (While the production function will always be rising, the amount it rises will always be less than before. On the other side, the total cost curve is the opposite, it too is always rising, but the amount it rises will always be more than before. Think of the too many cooks problem)

Accounting profits are typically: - Greater than economic profits because the former do not take explicit costs into account. - Equal to economic profits because accounting costs include all opportunity costs. - Smaller than economic profits because the former do not take implicit costs into account. - Greater than economic profits because the former do not take implicit costs into account.

Accounting Profits = Total Revenue - Explicit Costs Economic Profits = Total Revenue - (Explicit + Implicit Costs) Note: One has more costs that take away from total revenue than another

Which of the following definitions is correct? - Accounting profit + economic profit = normal profit. - Economic profit - accounting profit = explicit costs. - Economic profit = accounting profit - implicit costs. - Economic profit - implicit costs = accounting profit.

Accounting Profits = Total Revenue - Explicit Costs Economic Profits = Total Revenue - (Explicit + Implicit Costs) Note: Remember that the costs are subtracted from total revenue

https://imgur.com/gzwmHzo Refer to the above data. The total variable cost of producing 5 units is: - $61. - $48. - $37. - $24.

At 0 we have a total cost of $24, and since variable costs change based off of the output, we know that the $24 represents fixed costs. At 5 units the total cost is $61, minus our $24 fixed cost then gives us $37.

Which of the following curves is not U-shaped? - MC - AFC - AVC - ATC

Average Fixed Cost always decreases as output increases (defined earlier, but essentially is because you're spreading the set cost over a larger amount, which decreases each output you go up by)

https://imgur.com/CMQZCyB Refer to the above diagram. The vertical distance between ATC and AVC reflects: - The law of diminishing returns. - The average fixed cost at each level of input. - Marginal cost at each level of output. - The presence of economics of scale.

Average Total Cost = Average Variable Cost + Average Fixed Cost The vertical distance between ATC and AVC at any level of output is the difference between those 2 points, AKA: Average Fixed Cost

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100, - Average fixed cost is $10. - Average variable cost is $3. - Average total cost is $4. - Average total cost is $5.

Average Total Cost = Total Cost / Quantity of Output = $1,000 / 300 = 3.3333 Average Fixed Cost = Fixed Cost / Quantity of Output = $100 / 300 = .3333 Average Variable Cost = Variable Cost / Quantity of Output = $900 / 300 = $3

A production function describes - The relationship between cost and output. - How a firm turns inputs into output. - How a firm maximizes profits. - The minimal cost of producing a given level of output.

Cost and output is represented by the Total-cost curve, while the production function focuses on the inputs and outputs of the firm.

https://imgur.com/qoQW5Tw Refer to the above data. The average fixed cost of producing 3 units of output is: - $8. - $7.40. - $5.50. - $6.

FIXED COST = $24 (because its even there when output is zero). At 3 units of output, our never changing due to the change of output $24 fixed cost is (24 / 3 =) $8.

"Fixed cost is: - The cost of producing one more unit of capital, say, machinery. - Any cost which does not change when the firm changes its output. - Average cost multiplied by the firm's output. - Usually zero in the short run."

Fixed costs never change due to the change in output. Variable costs, on the other hand, do.

https://imgur.com/5nehSv4 The above diagram shows the short-run average total cost curves for five different plant sizes of a firm. The shape of each individual curve reflects: - Increasing marginal product, followed by diminishing marginal product. - Economies of scale, followed by diseconomies of scale. - Constant costs. - Increasing costs, followed by decreasing costs.

Increasing costs and decreasing costs would show a n (upside-down U-shape), constant costs would be a flat horizontal line, and while efficient scale does effect the shape of the U, Diminishing marginal product causes rising marginal cost of every output level, and vice versa leading to the proper U shape.

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes: - Economies and diseconomies of scale. - X-inefficiency. - The law of diminishing product of labor. - The law of diminishing marginal utility.

Its annoyingly worded, but the Diminishing Marginal Product Property is also sometimes referred to as the law of diminishing product of labor. (the whole too many cooks thing)

https://imgur.com/wsetmyf Refer to the above data. The marginal product of the sixth worker is: - 180 units of output. - 30 units of output. - 15 units of output. - Negative.

Marginal = Change in 180 - 165 = 15 units of output

https://imgur.com/NUqp3M8 Refer to the above data. The marginal product of the fourth worker: - Is 5. - Is 7. - Is 71/2. - Cannot be calculated from the information given.

Marginal = Change in 30 - 25 = 5

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output? - $250 - $350 - $340.91 - $275

Marginal Cost = Change in total cost/Change in quantity ( (3750-3500 = 250)/1 = 250)

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $4,500. The marginal cost of producing the 101st unit of output is $300. What is the total cost of producing 101 units? - $46.53 - $800 - $4,800 - $5,300

Marginal Cost = Change in total cost/Change in quantity ==> Change in total cost = Marginal Cost x Change in quantity (300 x 1 = 300) 4500+300 = 4800

Which of the following is correct? - There is no relationship between MP and MC. - When AP is rising MC is falling, and when AP is falling MC is rising. - When MP is rising MC is rising, and when MP is falling MC is falling. - When MP is rising MC is falling, and when MP is falling MC is rising.

Marginal Product and Marginal Cost have inverse relationships

https://imgur.com/LagFrUq Refer to the above data. When two workers are employed: - Total product is 20. - Total product is 18. - Average product is 10. - Total product cannot be determined from the information given.

Marginal Product is the change in total product, knowing that it increases by 10 from the total product of 8, (10+8), we know total product is 18.

https://imgur.com/ZQqUwbo Referring to the Table, What is the total output when 1 worker is hired? - 0 - 40 - 45 - 85

Marginal Product when 1 worker is hired is 40, so we know that there has to be a change of 40 in our output. 0 + 40 = 40

https://imgur.com/sfLKnOP In the above figure, curves 1, 2, 3, and 4 represent the: - ATC, MC, AFC, and AVC curves respectively. - MC, AFC, AVC, and ATC curves respectively. - MC, ATC, AVC, and AFC curves respectively. - ATC, AVC, AFC, and MC curves respectively.

Recalling earlier, the AFC is the only non-U curve that is always falling. (Also, remembering that since ATC is both AFC and AVC combined, it must be above all the other A_C's)

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting: - Profits were $100,000 and its economic profits were zero. - Losses were $500,000 and its economic losses were zero. - Profits were $500,000 and its economic profits were $1 million. - Profits were zero and its economic losses were $500,000.

Revenue = 100,000 * $50 = $5,000,00 Accounting Profit/Loss = Revenue - Explicit Cost $5 mil - $5 mil = 0 Economic Profit/Loss = Revenue - (Implicit + Explicit Cost) $5mil - $5.5 mil = -$500,000 (AKA: An Economic Loss of $500,000)

If a firm decides to produce no output in the short run, its costs will be: - Its marginal costs. - Its fixed plus its variable costs. - Its fixed costs. - Zero.

The answer cannot have variable costs, as they are costs that vary with the quantity of output produced, so its neither the fixed plus variable and marginal (which uses both costs). That leaves us with only fixed costs.

If average total cost is declining, then: - Marginal cost must be greater than average total cost. - The average fixed cost curve must lie above the average variable cost curve. - Marginal cost must be less than average total cost. - Total cost must also be declining.

The decline in average total cost can be due to either an increase in output or decrease in total cost, in either situation, the change between either output or cost will also have either increased or decreased respectively, making marginal cost less than average total cost. It might help to think that marginal cost focuses on the change between 2 points, while the average total cost spans the entire data set.

https://imgur.com/ddAMGrS Refer to the above data. Diminishing marginal product of labor become evident with the addition of the: - Sixth worker. - Fourth worker. - Third worker. - Second worker.

The first change in output is 40 from 0 to 1 worker, it then became 50 as we added a second worker, then becoming 36 with the third worker, fourth with 24, fifth with 15, and sixth also with 15.

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic - In the short run but not in the long run. - Neither in the short run nor in the long run. - In the long run but not in the short run. - Both in the short run and in the long run.

The long-run is always variable costs. However, the short-run has to have at least 1 fixed cost.

https://imgur.com/duQHDMF Refer to the above data. The profit-maximizing output for this firm: - Is 3. - Is 4. - Is 5. - Cannot be determined from the information given.

The profit-maximizing output is where Marginal Cost is equal to Marginal Revenue. However the data we are given provides no way of finding marginal revenue.

https://imgur.com/8xWNlc2 Refer to the above diagram. At output level Q total fixed cost is: - 0BEQ - BCDE - 0BEQ - 0AFQ - 0CDQ

Total Fixed Cost = Total cost - variable costs * output Points D and E represent the level of output Q on the ATC & AVC, then account for their price levels for the answer. BCDE

https://imgur.com/gjxcgXz In the above diagram curves 1, 2, and 3 represent: - Average variable cost, marginal cost, and average fixed cost respectively. - Total variable cost, total fixed cost, and total cost respectively. - Total fixed cost, total variable cost, and total cost respectively. - Marginal product, average variable cost, and average total cost respectively.

Total fixed cost will always stay the same no matter the change in output, and total cost = fixed + variable cost.

https://imgur.com/MWOs9RS Refer to the above diagram. At output level Q average fixed cost: - Is equal to EF. - Is equal to QE. - Is measured by both QF and ED. - Cannot be determined from the information given.

While QF represents fixed cost (because that's where AFC is at output Q), we are also given ATC and AVC on the graph, meaning that the distance between the 2, which is the difference between the 2, is also AFC. (Because ATC = AFC + AVC)

A local playground equipment company plans to operate out of its current factory, which is estimated to last 30 years. All cost decisions it makes during the 30-year period - Are long-run decisions. - Are short-run decisions. - Involve only maintenance of the factory. - Are zero because the cost decisions were made at the beginning of the business.

While the estimated lifetime of the company is 30 years, which would otherwise allow them to operate in the long run, they have chosen to operate out of their factory, leaving their decisions to be all short-run.