Exam 9: Long-Run Costs and Output Decisions

Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1 -Refer to Figure 9.1. This farmer's shutdown point is at a price of

Refer to the information provided in Figure 9.4 below to answer the question that follows. Figure 9.4 -Refer to Figure 9.4. From the diagram, existing firms in this industry make ________ economic profits, and as long as this continues, ________.

Refer to the information provided in Figure 9.1 below to answer the questions that follow. Figure 9.1 -Refer to Figure 9.1. This farmer's fixed costs are

Refer to Scenario 9.5 below to answer the questions that follow. SCENARIO 9.5: Investors put up $52,000 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. In the short run, if the restaurant decides to stay open, it will make operating profits of

Information on MC of production is all that is necessary to obtain the long run industry supply curve, because P = MC is the profit-maximization condition for all firms.

The Reliable Auto Repair Shop is earning a total revenue of $7,000. Its total fixed costs are $700, and its total variable costs are $2,500. The Reliable Auto Repair Shopʹs profit is

On the upward sloping portion of a firm's long-run average cost curve, it is experiencing

Refer to the information provided in Figure 9.7 below to answer the questions that follow. Figure 9.7 -Refer to Figure 9.7. If demand for wheat is D3, then in the long run

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 9.3 below to answer the questions that follow. Figure 9.3 -Refer to Figure 9.3. In the short run this firm should ________ and in the long run this firm should ________, if economic conditions do not change.

An industry with a horizontal long-run supply curve is called a(n) ________ industry.

Sources of external economies of scale include

For constant returns to scale, a(n) ________ in a firm's scale of production leads to ________ average total cost.

Profits in the short run attract resources to industries in the long run, allowing them to expand.

Economic profit is

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

Refer to Scenario 9.4 below to answer the questions 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 9.1 below to answer the questions that follow. SCENARIO 9.1: Amy borrowed $20,000 from her parents to open a bagel shop. She pays her parents a 5% yearly return on the money they lent her. Her other yearly fixed costs equal $9,000. Her variable costs equal $30,000. In her first year, Amy sold 40,000 dozen at a price of $1.50 per dozen. -Refer to Scenario 9.1. Amy's total costs equal

For a perfectly competitive industry, an improvement in technology will cause

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