Question 1

Explain why the ATC and AVC curves get closer and closer together as output increases.

Accepted Answer

The reason that the ATC and AVC curves g

Question 2

How does accounting profit differ from economic profit? Explain why accounting profit is more useful for paying your taxes while economic profit is more useful for deciding whether you should continue to stay in business. Give an example of an implicit cost and an example of implicit revenue.

Accepted Answer

Both measure profit as revenues less cos

Question 3

Why do most firms operate at output levels where there is diminishing marginal productivity?

Accepted Answer

The firm will not want to be in either t

Question 4

Define variable cost. What sorts of things might be included in variable cost? Do variable costs exist in the long run?

Accepted Answer

Variable costs are the costs of variable

Question 5

Why does the marginal cost curve always cut the average cost curve at the lowest point on the AC curve?

Accepted Answer

The relationship between average and mar

Question 6

The diagram below shows the production function for Clean-Like-New car wash business.   (a) Compute the total product, marginal product, and the average product values in the following table: $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Workers }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Product }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Product }
\end{array} \
\hline 0 & & & \
\hline 1 & & & \
\hline 2 & & & \
\hline 3 & & & \
\hline 4 & & & \
\hline 5 & & & \
\hline 6 & & & \
\hline 7 & & & \
\hline
\end{array}$$ (b) Where does increasing marginal productivity occur?
(c) Where does diminishing marginal productivity occur?
(d) Where does diminishing absolute productivity occur?

Accepted Answer

(a) @#IMG-DLM& (b) Increasing marginal productivit

Question 7

Give the definition of fixed cost. What sorts of things might be included in fixed cost? Do fixed costs exist in the long run?

Accepted Answer

Fixed costs are costs of fixed inputs th

Question 8

The diagram was intended to illustrate the MP and AP curves that correspond to each other. Explain why the diagram below is incorrect.

Accepted Answer

If the marginal product (MP) is below av

Question 9

What is the distinction between the microeconomic short run and the microeconomic long run? How do these definitions relate to specific periods of calendar time?

Accepted Answer

The microeconomic long run is a period o

Question 10

Why are the MC and AVC curves U-shaped?

Accepted Answer

The MC and AVC curves are U-shaped becau

Question 11

What is the law of diminishing marginal productivity? Why does it apply only to the short-run?

Accepted Answer

The law of diminishing marginal producti

Question 12

How is accounting profit different from economic profit? How are they the same?

Accepted Answer

The similarity is that both measure prof

Question 13

Draw and correctly label a typical set of AFC, ATC, AVC, and MC cost curves.

Accepted Answer

The correc

Question 14

You are given that the average variable cost of producing 25 units of output is $4 and the total cost is $200. Calculate VC, FC, ATC, and AFC.

Accepted Answer

VC = AVC × Q = $4 × 25 = $100.

Explain why the ATC and AVC curves get closer and closer together as output increases.

How does accounting profit differ from economic profit? Explain why accounting profit is more useful for paying your taxes while economic profit is more useful for deciding whether you should continue to stay in business. Give an example of an implicit cost and an example of implicit revenue.

Why do most firms operate at output levels where there is diminishing marginal productivity?

Define variable cost. What sorts of things might be included in variable cost? Do variable costs exist in the long run?

Why does the marginal cost curve always cut the average cost curve at the lowest point on the AC curve?

Give the definition of fixed cost. What sorts of things might be included in fixed cost? Do fixed costs exist in the long run?

The diagram was intended to illustrate the MP and AP curves that correspond to each other. Explain why the diagram below is incorrect.

What is the distinction between the microeconomic short run and the microeconomic long run? How do these definitions relate to specific periods of calendar time?

Why are the MC and AVC curves U-shaped?

What is the law of diminishing marginal productivity? Why does it apply only to the short-run?

How is accounting profit different from economic profit? How are they the same?

Draw and correctly label a typical set of AFC, ATC, AVC, and MC cost curves.

You are given that the average variable cost of producing 25 units of output is $4 and the total cost is $200. Calculate VC, FC, ATC, and AFC.

Economics and Economic Reasoning

The Production Possibility Model, Trade and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

International Trade Policy, Comparative Advantage, and Outsourcing

International Trade Policy

Production and Cost Analysis II

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters

Exam 11: Production and Cost Analysis I

Explain why the ATC and AVC curves get closer and closer together as output increases.

How does accounting profit differ from economic profit? Explain why accounting profit is more useful for paying your taxes while economic profit is more useful for deciding whether you should continue to stay in business. Give an example of an implicit cost and an example of implicit revenue.

Why do most firms operate at output levels where there is diminishing marginal productivity?

Define variable cost. What sorts of things might be included in variable cost? Do variable costs exist in the long run?

Why does the marginal cost curve always cut the average cost curve at the lowest point on the AC curve?

Give the definition of fixed cost. What sorts of things might be included in fixed cost? Do fixed costs exist in the long run?

The diagram was intended to illustrate the MP and AP curves that correspond to each other. Explain why the diagram below is incorrect.

What is the distinction between the microeconomic short run and the microeconomic long run? How do these definitions relate to specific periods of calendar time?

Why are the MC and AVC curves U-shaped?

What is the law of diminishing marginal productivity? Why does it apply only to the short-run?

How is accounting profit different from economic profit? How are they the same?

Draw and correctly label a typical set of AFC, ATC, AVC, and MC cost curves.

You are given that the average variable cost of producing 25 units of output is $4 and the total cost is $200. Calculate VC, FC, ATC, and AFC.

Economics and Economic Reasoning

The Production Possibility Model, Trade and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

International Trade Policy, Comparative Advantage, and Outsourcing

International Trade Policy

Production and Cost Analysis II

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters