Exam 9: Long-Run Costs and Output Decisions

[(P - ATC)q] represents

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 long-run supply curve would be found by drawing a line from

Which of the following is an example of economies of scale?

Which of the following will shift the short-run industry supply curve of a perfectly competitive industry?

A(n) ________ will shift the short-run industry supply curve of a perfectly competitive industry.

Firms that are "breaking even" are

A firm that experiences only constant returns to scale will have a U-shaped long-run average cost curve.

Refer to the data provided in Table 9.2 below to answer the question(s) that follow. Table 9.2 q TFC TVC TC MC AVC ATC 0 \ 50 \ 0 \ 50 -- -- -- 1 50 20 70 20 20 70 2 50 30 80 10 15 40 3 50 45 95 15 15 31.67 4 50 62 112 17 15.50 28 5 50 90 140 28 18 28 6 50 132 182 42 22 30.33 7 50 186 236 54 26.57 33.71 -Refer to Table 9.2. If the market price is $28 and the firm produces 5 units of output, then its profit would be

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. Total variable costs per week are

Refer to the data provided in Table 9.4 below to answer the question(s) that follow. Table 9.4 q TFC TVC TC MC AVC ATC 0 \ 100 \ 0 \ 100 -- -- -- 1 100 40 140 40 40 140 2 100 60 160 20 30 80 3 100 90 190 30 30 63.33 4 100 124 224 34 31 56 5 100 180 280 56 36 56 6 100 264 364 84 44 60.67 7 100 372 472 108 67.42 -Refer to Table 9.4. If the market price is $40, then to maximize profits this firm should produce

Assume the watermelon industry is perfectly competitive and in long-run equilibrium with a market price of $10. If the demand for watermelons increases in this decreasing-cost industry, long-run equilibrium will be reestablished at a price

Assume the tennis ball industry, a perfectly competitive industry, is in long-run equilibrium with a market price of $5. If the demand for tennis balls increases and the industry experiences decreasing returns to scale, long-run equilibrium will be reestablished at a price

Entry of new firms in an increasing-cost industry leads to an upward shift of the LRAC curve.

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 will earn a zero economic profit if price is

Economies of scale cannot be due only to the sheer size of a firm's operation.

Refer to the data provided in Table 9.1 below to answer the question(s) that follow. Table 9.1 q TFC TVC TC MC AVC ATC 0 \ 50 \ 0 \ 50 -- -- -- 1 50 20 70 20 20 70 2 50 30 80 10 15 40 3 50 45 95 15 15 31.67 4 50 62 112 17 15.50 28 5 50 90 140 28 18 28 6 50 132 182 42 22 30.33 7 50 186 236 54 26.57 33.71 -Refer to Table 9.1. If the market price is $42, then in the long run the firm will

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

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 will ________ if price is between $7 and $13.

Which of the following is the set of conditions necessary for long-run equilibrium for a perfectly competitive firm?

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. Suppose demand for wheat is initially D₂. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat, and individual profit-maximizing firms will produce ________ bushels of wheat.