Exam 9: Long-Run Costs and Output Decisions

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. This farmer would be breaking even if price was

A firm suffering short-run losses will continue to operate rather than shut down when price is less than its average variable costs.

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

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 revenue is

The following is the set of conditions is necessary for ________ for a perfectly competitive firm: P = SRMC = SRAC = LRAC.

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 total cost will be

If the price of an input increases, each individual firm's marginal cost curve shifts ________ and the industry supply curve ________.

Refer to Scenario 9.4 below to answer the question(s) that follow. SCENARIO 9.4: Sponsors invest $100,000 in a new deli on the promise that they will earn a return of 10% per year on their investment. The deli sells 52,000 sandwiches per year. The deli's fixed costs include the return to investors and $42,000 in other fixed costs. Variable costs consist of wages ($1,000 per week) plus materials, electricity, etc. ($2,000 per week). The deli is open 52 weeks per year. -Refer to Scenario 9.4. The annual total costs of the deli are

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. Weekly total revenue is

As new firms enter a decreasing-cost industry

A perfectly competitive firm's ________ point is the lowest point on its AVC curve.

In efficient markets, investment capital flows toward profit opportunities.

Assume a perfectly competitive industry is in long-run equilibrium at a price of $150. If this industry is an increasing-cost industry and the demand for the product increases, long-run equilibrium will be reestablished at a price

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 $30, then this firm will maximize profits by producing ________ units of output.

When a firm shuts down in the short run, it breaks even.

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. Assume this firm is in a constant-cost industry. For this firm to be in long-run equilibrium, the firm must be producing

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

Firms are making profits in an increasing-cost industry. Which of the following statements describes what will happen in the long run?

Refer to Scenario 9.2 below to answer the question(s) that follow. SCENARIO 9.2: Tom borrowed $40,000 from his parents to open a donut stand. He agrees to pay his parents a 5% yearly return on the money they lent him. His other yearly fixed costs equal $10,000. His variable costs equal $25,000. He sold 40,000 dozen donuts during the year at a price of $2.00 per dozen. -Refer to Scenario 9.2. Tom's total revenue was

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