Exam 9: Long-Run Costs and Output Decisions

If the price of an input decreases, each individual firmʹs marginal cost curve shifts ________ and the industry supply curve ________.

The ________ for a perfectly competitive industry is the horizontal sum of the individual firmsʹ marginal cost curves above AVC.

Refer to the information provided in Figure 9.7 below to answer the question(s) that follow. Figure 9.7 -Refer to Figure 9.7. This increasing cost industry's ________ would be found by drawing a line from points B to E.

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. The bakery is making ________ economic profits per week.

A firm stands to gain by operating instead of shutting down as long as ________ sufficiently covers ________.

Refer to Scenario 9.5 below to answer the question(s) that follow. SCENARIO 9.5: 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 percent 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 $3 on average per meal. -Refer to Scenario 9.5. In the short run, if the restaurant shuts down, its losses will equal its ________ costs of ________.

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 $84, then this firm will maximize profits by producing ________ unit(s) of output and its profits will be ________.

When price is sufficient to cover average variable costs, firms suffering short-run losses will continue to operate rather than shut down.

If a firm's profit is $0, then it must be true that

Refer to the information provided in Figure 9.3 below to answer the question(s) that follow. Figure 9.3 -Refer to Figure 9.3. This firm's shutdown point corresponds to Point

If price lies above the minimum point on the ATC curve, in the short run the firm should ________ and in the long run it should ________.

A firm stands to lose by operating instead of shutting down if ________ does not sufficiently cover ________.

Marginal revenue equals marginal cost at an output of 10 units. At this output, marginal revenue equals $25, average variable cost equals $30, and average total cost equals $40. In the short run, a profit-maximizing firm will earn a profit of

Engineers for The Giffen Record Company determine that a 30% increase in all compact disc inputs will cause a larger percentage increase in output. Assuming that input prices remain constant, you correctly deduce that such a change in inputs will cause ________ as output increases.

The ________ supply curve(s) of a perfectly competitive firm is the portion of its marginal cost curve that lies above its average variable cost curve.

Every point on a U‐shaped long-run average cost curve represents

As long as price is sufficient to cover ________, the firm is better off by operating rather than by shutting down.

Refer to the information provided in Figure 9.2 below to answer the question(s) that follow. Figure 9.2 -Refer to Figure 9.2. The firm's shut down point is at a price of

Technology is a primary source of economies of scale for many firms.

Engineers for the Off Road Skateboard Company have determined that a 10% increase in all inputs will cause output to increase by 5%. Assuming that input prices remain constant, you correctly deduce that such a change will cause ________ as output increases.