Exam 9: Long-Run Costs and Output Decisions

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. The type of industry depicted in this situation is

Refer to Scenario 9.10 below to answer the question(s) that follow. SCENARIO 9.10: Investors put up $1,040,000 to construct a building and purchase all equipment for a new cafe. The investors expect to earn a minimum return of 10 percent on their investment. The cafe 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 $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The cafe charges $6 on average per meal. -Refer to Scenario 9.10. In the long run, the cafe will want to

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

The Razor-Thin Disposable Razor Company is a perfectly competitive firm producing where MR = MC. The current market price of a disposable razor is $3.00. The firm sells 1,800 disposable razors. Its AVC is $2.00 and its AFC is $1.50. What should Razor-Thin do?

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.

A firm that has increasing returns to scale in the long run does not experience diminishing marginal returns in the short run.

Refer to the information provided in Figure 9.1 below to answer the question(s) that follow. Figure 9.1 -Refer to Figure 9.1. If this farmer maximizes profits, his average variable cost will be

Refer to Scenario 9.6 below to answer the question(s) that follow. SCENARIO 9.6: Celeste borrowed $40,000 from her brother to open a car wash. She pays her brother a 5% yearly return on the money he lent her. Her other yearly fixed costs equal $18,000. Her variable costs equal $40,000. In her first year, Amy sold 40,000 car washes at a price of $2.50 per car wash. -Refer to Scenario 9.6. Celeste's total revenue is

If TR > TVC but TR < TC, a firm would ________ in the short run and ________ in the long run.

Pappy's Popcorn Emporium operates in a perfectly competitive industry and hires you as an economic consultant. Pappy's is currently producing at a point where market price equals its marginal cost. Its market price is greater than its average variable cost but less than its average total cost. You advise Pappy's to

Refer to the information provided in Figure 9.5 below to answer the question that follows. Figure 9.5 -Refer to Figure 9.5. Based on the figures, supply will ________ in the long run and profits should ________.

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. If demand for wheat is D₃, then in the long run

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. Total revenue per week is

Assume a perfectly competitive industry is in long-run equilibrium at a price of $20. If this industry is a constant-cost industry and the demand for the product decreases, long-run equilibrium will be reestablished at a price

When ________ scale of production leads to ________ average costs, an industry exhibits increasing returns to scale.

The shutdown point for a perfectly competitive firm is the

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 short-run supply curve is the firmʹs

Assume firms break even in an industry. New firms ________ attracted to the industry and current ones ________ exiting it.

As existing firms exit a decreasing-cost industry

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 ________ is the firm's marginal cost curve above point B.