Exam 9: Long-Run Costs and Output Decisions

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 for this firm to maximize profits it should produce ________ units of output and its profits will be ________.

If a perfectly competitive firm operates in the short run and expands in the long run, then the firm's short run condition is

In the short run, firms earning a profit will want to ________ their profits while firms suffering losses will want to ________ their losses.

If, at the output where marginal revenue equals marginal cost, price is below average variable cost, a firm will shut down in the short run.

Every point on a ________ represents the minimum cost at which the associated output level can be produced when the scale of plant can be changed.

In efficient markets, profit opportunities are quickly eliminated as they develop.

Marginal revenue equals marginal cost at an output of 20 units. At this output, marginal revenue equals $20, average variable cost equals $15, and average total cost equals $25. In the short run, a profit-maximizing firm will earn a profit of

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 ________ point is at a price of $6.

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

Refer to the data provided in Table 9.3 below to answer the following question(s). Table 9.3 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 67.43 -Refer to Table 9.3. If the market price is $34, then in the short run the firm will

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 variable costs per week are

If total revenue exceeds the total cost of production, a firm

The smallest size plant size at which the long-run average cost curve is at its minimum is called the

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. Industry demand is initially D1 and industry supply is initially S1 in this increasing cost industry. If demand increases to D2, then in the long run the industry will

Industries in which firms ________ are likely to expand in the long-run.

Related to the Economics in Practice on page 198: If firms have long-run average cost curves with a long, flat section

Related to the Economics in Practice on page 196. The search engine business is subject to ________, which means that as the use of the search engine increases, the long-run cost to provide additional searches on that search engine will likely fall.

The short-run industry supply curve for a perfectly competitive industry is the

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 D₁, then a profit-maximizing firm will produce ________ units and earn ________.

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.