Exam 9: Long-Run Costs and Output Decisions

Suppose Heidi's Ice Cream experiences economies of scale up to a certain point and diseconomies of scale beyond that point. Its long-run average cost curve is most likely to be

Refer to the information provided in Figure 9.6 below to answer the question(s) that follow. Figure 9.6 -Refer to Figure 9.6. For this firm, diseconomies of scale set in after ________ units of output.

In the short run

As existing firms exit a decreasing-cost industry

If ________, a firm would shut down in the short run and exit the industry in the long run.

Refer to Scenario 9.3 below to answer the question(s) that follow. Scenario 9.3: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 per cent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $5 on average per meal. -Refer to Scenario 9.3. Economic profit per week is

The Supply Room, a mail-order school supply store, grew rapidly. As a result of achieving a much larger size, the Supply Room is able to realize (1) volume discounts when buying from its suppliers, and (2) lower transportation costs by shipping in bulk. The best explanation of this is that the Supply Room seems to be experiencing

Refer to Scenario 9.7 below to answer the question(s) that follow. SCENARIO 9.7: Julio borrowed $80,000 from his great aunt to open a coffee stand at a local flea market. He agrees to pay his great aunt a 5% yearly return on the money she lent him. His other yearly fixed costs equal $16,000. His variable costs equal $60,000. He sold 50,000 cups of coffee during the year at a price of $3.00 per cup. -Refer to Scenario 9.7. Julio's total costs equal

Input prices fall as entry occurs in an decreasing-cost industry.

As long as economic losses are being incurred in an industry, firms will ________ the industry and the supply curve will shift to the ________.

Diseconomies of scale cannot be due only to the sheer size of a firmʹs operation.

A perfectly competitive firm is breaking even. In the short run it should ________. In the long run it should ________.

Across different output levels, a firm can experience both economies and diseconomies of scale.

Refer to the data provided in Table 9.3 below to answer the following question(s). Table 9.3 -Refer to Table 9.3. If the market price is $34, then in the short run the firm will

Related to the Economics in Practice on page 199: The price of hot dogs sold from a cart in New York's Central Park is much higher than the standard price elsewhere in New York. Which of the following, if true, would provide the best explanation for this difference?

Refer to Scenario 9.8 below to answer the question(s) that follow. SCENARIO 9.8: Investors put up $1,040,000 to construct a building and purchase all equipment for a new gourmet cupcake bakery. The investors expect to earn a minimum return of 10 per cent on their investment. The bakery is open 52 weeks per year and sells 900 cupcakes per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The bakery charges $8 on average per cupcake. -Refer to Scenario 9.8. Economic profit per week is

Assume the market for beef is perfectly competitive. Beef producers are currently earning a zero economic profit. If consumers switch from chicken to beef, which of the following is most likely to occur?

The Reliable Auto Repair Shop has total revenue of $5,000. It has total fixed costs of $700 and total variable costs of $2,500. The Reliable Auto Repair Shop's profit is

Which of the following is the correct way to calculate total cost?

Assume a perfectly competitive industry is in long-run equilibrium at a price of $75. If this industry is a constant-cost industry and the demand for the product decreases, long-run equilibrium will be reestablished at a price